Will Sri Lanka become like Spetses?

Our Rulers want to make Sri Lanka a hub for aviation, tourism and many other things. Will they inadvertently end up creating something like Spetses?

Spetses is a small Greek island, a an exotic playground for rich tycoons. Once a destination for cheap package holidays, the country moved up-market in the 1990's and now caters mostly to the super-rich who can afford to pay high prices for all services and products, much to the dismay of the small population of residents who find that living there is unaffordable.

The parallels between the two struck me when a friend rang me up asking if I knew of a place that would charge a reasonable rate for a holiday. Some friends had come from overseas and were looking to get out of Colombo. Many places were full and were quoting the most absurd rates.

When checking with a friend in the travel trade he told me that a couple of Eastern European and Russian charters had arrived, filling up a number of hotels. Sri Lankan expats, returning home for holidays and willing to splash out (partly to show off?) had booked up the rest.

The problem is that Sri Lanka has witnessed a continuous outflow of people over the last few decades. Some for political reasons but many because life was hard. They return for holidays and December seems to be the month that most now favour.

Hotels, clubs and restaurants make the most of it, gouging their customers with exhorbitant prices. The expats and the tourists may grumble but eventually cough up. Its either that or stay under-entertained on a holiday, which does not seem worthwhile, given the time and expense taken to get here in the first place.

For the locals, this presents a huge problem. If its just a case of planning a holiday for oneself, then its a simple case of postponing, but what do we do if one wants to go somewhere with some of those same expats? Not a happy choice to make, its either spend time with friends or worry about costs.

The holiday rush generally takes place in December, with a slightly smaller 'season' in March/April (Easter/'Big Matches) and July/August (summer). Its fairly predictable so canny locals can try to avoid these months when planning holidays, although going to the gym or finding parking at a shopping complex can be real headache.

Discretionary costs, like holidays can be managed but the bigger issue is high cost of living, a daily problem from which there is no escape. Unlike in Spetses where it is the rich visitors who have driven up prices in Sri Lanka it is the Government that is driving up prices through taxation. This causes people to leave, who then return for holidays and drive up the costs of everything for the season. A bit of a vicious circle, or a virtuous one, depending on how one looks at it.

To the expats, marvelling at the smart streets, shops, hotels and flats Sri Lanka looks to be booming. There are places to go and things to do, at a price. The expats who marvel at the skyline will look for opportunities to return. Many don't. Although things seem to be booming, somehow the opportunities don't really seem to exist. 

It does seem strange, with all the constuction and smartening up going on there must surely be jobs? There are jobs for construction workers, waiters, barmen, room boys but not a lot that would be of interest to the educated. The problem is that, apart from construction, and that too mainly Chinese, not a lot of investment is taking place.

Those that do return soon find that old evil-the cost of living, dogging them again so they leave. I know workers at my local garage who have been on several overseas stints; each time they swear it will be their last. After a while they are forced to leave again.

The funny thing is that it is actually the remittances from overseas workers that props up local demand- not many families can live comfortably without the help from overseas. It is also my (unverified) belief that this is the critical the factor that has pushed Sri Lanka to middle income status-not low-wage manufacturing/service jobs (although this factor is not absent).

From casinos to night races, from luxury shopping to boutique hotels Sri Lanka seems to be gearing up to cater to the rich. Will we then find ourselves in a trap, a country where we love to visit but can never afford to live? 

Tales of public buildings in Sri Lanka

"Great nations write their autobiographies in three manuscripts—the book of their deeds, the book of their words, and the book of their art. Not one of these books can be understood unless we read the two others; but of the three, the only quite trustworthy one is the last. The acts of a nation may be triumphant by its good fortune; and its words mighty by the genius of a few of its children: but its art, only by the general gifts and common sympathies of the race.

Again, the policy of a nation may be compelled, and, therefore, not indicative of its true character. Its words may be false, while yet the race remain unconscious of their falsehood; and no historian can assuredly detect the hypocrisy. But art is always instinctive ; and the honesty or pretence of it are therefore open to the day."

John Ruskin (from St. Mark's Rest: The History of Venice)

Old Parliament Building , Colombo 

New Parliament, Kotte

 Old Law Courts Complex, Hulftsdorp

New Supreme Court Building

Take a look at the pictures above. The new Parliament building was constructed during 1979-1982, shortly after the second republican constitution of 1978 sounded the death-knell for democracy in the country.

The Supreme Court was established by the constitution of 1972. That constitution abolished the right of appeal to the Privy Council in the UK, leaving the Supreme  Court as the  highest court of appeal.

The decline of the judiciary was a slower, less sharply defined process than the decline of Parliament but the rise of the new courts complex reflected the erosion of the independence of the court.

These buildings serve now only as tombstones, unwitting monuments to the dead institutions they house.

Christmas Recipe : How to Make a Banana Republic.

I know cooking is one of the more popular topics on Kottu, so let me take a stab at my own, a Christmas Special, if you like.

I am a great fan of plantains, sometime referred to as banana's. I was looking for some interesting things to do with banana's (for the record I do not possess a dirty mind) when I came across a recipe, for the making of a proper Banana Republic.

Things you’ll need

Theology – An established religion is a necessary ingredient. But if not, then any set of whimsical thoughts, hallucinations and outdated ideas will suffice.

Slogans – Slogans are mandatory. Without them you are not going to end up making a successful banana republic. In fact, banana republics chiefly rely upon slogans – slogans of democracy, slogans of rule of law, slogans of becoming the best nation in the world, slogans of triumph over the enemy, slogans of ‘national sovereignty’, slogans of chosen nation by gods, slogans of Mard-e-Mujaahid, slogans of food, clothes and shelter, slogans of the ‘shinning’ nation are all the buzz words which can be utilized to tranquilize masses in your banana republic.

A Constant Enemy – banana republics can’t exist without a constant enemy, which you can continuously keep the masses afraid of. A constant enemy is actually your friend, because it serves the purpose of enabling you to drag the attention of masses over it, while giving you time and chance to loot and plunder them. There are many benefits of a constant enemy. Your armies can churn up a fair share of budget on name of defense. Your institutions can utilize public money one name of developing new war technologies. Your every policy can be formed keeping in view the danger of that constant enemy. You can plant the seeds of patriotism because of that enemy. In fact, the advantages are numerous, the list is long.

Note: Class society is a presupposed fact in this regard, since no state can be erected in a classless society.

How Tos
1-      Start by propaganda in press and media that the country is in real danger, its finances are low, taxes are essential, austerity measures are inevitable – thus people have to sacrifice.
2-      Often repeat the mantra, ‘Motherland is passing through difficult times!’
3-      When inquired about your governance, again repeat the mantra, ‘All is fair’.
4-      Start a controlled exchange of fire or a semi-war with your constant enemy, and often keep that side of danger open. This will enable you to fool the masses into thinking that country is really in danger. They ought to drop aside their usual economical and democratic demands.
5-      Whosoever dares talk to you on matters of state and affairs, try to make him/her subdue by making excuses from banana republic’s theology/theory.
6-      Tighten up policing, keep judiciary in your pockets, offer bribes often, and keep in close touch with religious clerics.
7-      You may sabotage the political activists who are against you.
8-      Secret police and your intelligence agencies should often pick people and kill them after. Off course, you have need not bear any voice of descent in your banana republic
9-      If people get tired with your autocratic rule, return to shallow ramshackle democracy, which should continue the same old rule under new name and faces.
10-   For direct exploitation of your masses, sell your all resources of country to private firms, multinational companies, privatize as much as you can. And then call it ‘development’.
11-   Dose people with religious dogmas; celebrate religious rituals and days often.
12-   Put the label of ‘national interest’ on every action you do in your self interest.
13-   Make national fascism, while exploiting people’s natural love with their homeland. This patriotism is your most useful weapon.

This way, you will at least lay the foundation of a banana republic.

When I wrote this almost seven years ago, I think I was only half-serious. Reading through this article made me think: have we reached the level of lunacy where this appelation is now entirely appropriate? Will anyone care to fill out the list of ingredients and see what we end up with? Certainly not a Breudher, thats for sure. Maybe a Banana Split?

Sri Lanka in the Limelight

The fightinme had written something about Sri Lanka being in the spotlight.

It is true that some of the criticism is orchestrated by the Tamil/Tiger diaspora; I’m never sure where the Tamil diaspora ends and where the Tiger diaspora begins. Whatever criticism made needs to distance itself completely from the Tigers, which unfortunately it does not. As I pointed out here the Tigers have equal responsibility for the final war and its terrible end.

Coming back to fightinme’s argument, I think we need to change the discourse to one of individual liberties. What we must ensure is that the liberties of individuals be protected. The only lasting protection can come from institutions: the constitution (which is supposed to limit the ruler’s power), the courts and parliament which are also supposed to check the ruler’s power.

The entire system has been broken completely; by corruption and the culture of impunity. Citizens no longer enjoy any rights and if one comes under threat one needs to turn to the protection of some politician; not the police or courts.

The war did not end in Jaffna. The incidents on Katunayake, Chilaw and Rathupaswela are simply extensions of the same culture of impunity and the treatment of opponents.

There are many others, like the above at a smaller, individual level, such as the torture of painter, a small businessman and an orderly in a hospital.

The victims during the war were mostly Tamil. Today it can be anyone, anywhere. You and I may have some political connection that the unfortunates above lacked; we may think ourselves safe; for the moment at least. It depends how much longer our political connections can last and how soon the politico will fall from grace.

Why is the GoSL so agitated about international criticism?

Because local criticism is stifled completely; they can do as they please and get away with it. The press is pretty much under control and with the police and courts doing their bidding, no action is possible anyway. Foreign criticism is a bit harder; it causes them to pause, even for a bit.

Thanks to CHOGM and David Cameron, the regime has paused to think, put the BBS back in the drawer, held the Northern Provincial council election, moved on the Khuram Shaikh murder and is even talking of a TRC style commission.

As I said before; what matters to us today is not what went on in the war; it is the fact that it continues to stalk us today. For the unfortunates like Shaikh, it may come too late, but perhaps their fate will serve to spare us.

How ironic that sixty odd years after independence, the best guarantee of liberty today comes from Britain's Prime Minister.

A hundred posts, a new look and maybe a new beginning

I started playing around with the look of this blog, I'm not not the greatest designer but I think a change in look will help refresh my mind.

I've managed a hundred posts this year but at the expense of quality. There are a few posts that I am happy with but a lot that are below par. Not enough time to think or reflect. I have not done any proper reading for almost six months and my brain is feeling pretty dead.

I changed jobs in July and work has been pretty hectic. When I get home I don't seem to have the energy to pick up a book. Also my Economist subscription was delivered at my office. As I have not yet got around to persuading management here that I need it, my regular source of news and analysis has been cut off.

The local press is hardly worth reading and even the online resources are looking tired and stale; it sounds like the same old story being repeated. The local Blogosphere is as dead as the dodo and while twitter is a useful source of news no debate takes place. 

My New Year's resolution is to start reading again, I'm easing myself in with Tea & Memories and Sri Lankan Memories.

Why are the budgets of so many Pradesheeya Sabha's being defeated?

Something strange seems to be going on in the Pradesheeya Sabhas. Many of them, despite having a majority seem unable to pass their budgets.

For a while I was wondering if there was some sort of conspiracy or some underground opposition activity that was manifesting itself. It sounds unlikely but was a possibility; given that the opposition members and some ruling party members seemed to be teaming up.

Had a chat with a friend about this and he was as mystified as I was. He said that the only common denominator was that in each body, it was a move by the members against the Chairman and sometimes the Vice-Chairman.

It was then that a little light bulb went on. Could this be a simple case of thieves falling out?

About seven or eight years ago a classmate of a friend was campaigning for a seat in a Pradesheeya Sabha. My friend was quite involved in the campaign lending his friend his car and helping out by other means. My friend mentioned to me that the target for the Chairman of a Pradesheeya Sabha to earn over a 5 year period of office was Rs.30m!

This sum was earned mainly by collecting bribes for the issue of building permits, authorising water and electricity connections and similar activities. It could not be earned in Colombo and the major towns because there was not much housing being built but in the suburbs where lots of housing schemes were coming up there was much opportunity.

From the point of view of the corrupt official, the Pradesheeya Sabha offers an added advantage: near invisibility. The local press, generally docile anyway, tend to ignore local Government issues as they are seen to be unimportant, which means no likelihood of embarrassment. The liklihood of punishment is rare anyway but occasional embarrassing exposures are sometimes possible.

Based on the limited knowledge that I have gathered over the past few years I believe the scale of bribery has expanded massively in the last 7-8 years, therefore the intensity of competition for political office has increased.

It is likely that once ensconced in office, the Pradeshheya Sabha Chairmen have been trying to keep all the loot to themselves and not share it out equally with other members, hence the reason for wanting to eject the Chairman by defeating the budget.

This is only a hypothesis, but does anyone else have any information to share?


Update 20th December

Met a friend yesterday who has to deal with the Pradesheeya Sabha's. He said that he had heard complaints before from members that the Chairman/vice chairman was not sharing the spoils. 

Felling trees to pay workers dues - is this sustainable?

The proposal to fell the timber on estates to pay the statutory dues (EPF, ETF) of workers is again in the news, but no one seems to be posing the most fundamental of questions: can this be sustained?

If this proposal works out they may be able to settle the past dues, but once this is done, how do they plan to make payments in the future?

The plantations being (mis)managed by the state are almost all running at massive losses. Things have got so bad that these estates have not been able to pay the statutory dues of employees for decades. I looked at some of the numbers of these estates around ten years ago. At that time there was about ten years of unpaid statutory dues. I don't think anything of significance has been paid since then.

Until somethig is done or a miracle takes place, operationally they will continue to make losses. Therefore there is no possibility that they can meet dues in the future either.

Has anyone even thought about this? Stripping assets is something that can be done on a one-off basis, but how do they plan to stop the financial black hole where money vanishes in to thin air?

Its a bit like surgery; cutting off a limb or some organ is acceptable if the patient is cured. If it does not cure but only provides temporary relief, it will only be  a question of time before something else needs to be cut off, just to survive. Keep cutting and the patient will eventually be killed.

In my opinion, approval for this should not be given until and unless a comprehensive workable plan is in place to restructure the estates. There is also more to this than meets the eye.

For a start, how can a state enterprise not pay statutory dues for a period of a decade or more and not face a problem? How could something this sensitive go unnoticed for so long?

There are plenty of loss-making state enterprises around;  but to my knowledge none of them avoid paying their workers dues. Indeed the principal purpose of many state enterprises seem to be job-creation. If the Government had dared to delay workers payments in any of these the unions would have taken to the streets and there would have much hue and cry raised by the opposition.

Talking to some old planters, they believe that the reason the problem grew so large was because the workers affected belonged to a voiceless underclass: Plantation Tamils.

The Tamil plantation workers are a constituency no one is interested in and are therefore effectively voiceless. Please note that I am not saying that the union is not powerful: it is but it serves mainly as a vehicle to fatten the pockets of its leader, not to speak for its representatives.

The modus operandi of the plantation union leader is as follows: he delivers a block vote to the Government, in return for which he is allowed to extract whatever he can from the estates/ministry. If one recalls the history of this man (and his father); they have been in every single Government of whatever hue. He collects his votes, generally in coalition with the UNP and then joins whoever is in Government.

Once a year he goes and tells the Government that he needs to keep the vote base happy and that in order to do so he needs to extract a wage hike. The Government then muscles the private estates who cough up the money. Since it comes at no cost to the Government they are happy enough to oblige. However the Government estates and other problems where the Government is involved are ignored.

When travelling around tea estates I have spoken to some workers on the Government properties; they claim that not only are the EPF, ETF and gratuity not paid sometimes even the wages are not being paid.

On private estates the rule that the estates must provide 22 days of 'work' a month is rigidly enforced, on state estates it not. One employee on Hare Park told me that they get about three days of work a month. The workers eke out an existence by cultivating other crops and odd jobs.

Since the unions and opposition are silent, the question also needs to be posed as to what is driving this proposal. Most probably the opportunity to make a quick buck by either undervaluing the timber being sold or removing more trees than the estates get paid for.

There is now an enabling culture where dealmakers are allowed to flourish. As there is little transparency in processes and no liklihood of punishment, everyone is looking to make money as quickly as possible.

No one is interested in business; everyone wants a 'deal'. Whether it is ETF and Sri Lankan Insurance funds being used to buy overvalued shares (which just happened to be sold by cronies) to clearing jungles, nothing is off the table and nothing is sacred.

Truly, a bandit economy.


ps. I wrote about some of the other aspects of the problem in felling trees on estates here.

Food prices and the budget for 2014

The satirical LBO piece, A Dress to Kill Budget, apart from being very entertaining is quite seriously, best summary of the main thrust of this years budget. They could have added that defined professionals (including accountants, lawyers, accountants, engineers and some academics) were given a tax reduction (to a maximum of 16% compared to the current 24%) and, even better, if they were in practice could be expected to be taxed between 12%-16%.

Truly a budget where benefits were doled out to the richer sections of society. Taxes on food, a staple for this regime went up, the tables below will be of interest to anyone who wants to know by how much these changed. (Source: CT Smith Stockbrokers)

A CHOGM Post: Did Britain grow rich by exploiting its colonies?

When we were is school we told that the British (and the Portuguese and Dutch before them) invaded the country and exploited its resources and grew rich in the process. This was said as if it were accepted wisdom, simple statements but with no analysis. No one thought this was very important, since it was old history anyway and no one bothered to question this. 

They were rich, we were poor; they colonised us, ergo this must be true. This claim and variants of it is now in the media.

The question that I have been pondering is, if the British were growing rich on the country's resources, why did the country fail to prosper after independence? The easy answer to give is that although the country received political independence, trade and business remained in the hands of the British. A neo-colonial instrument of control that continued after independence.

Some of our leaders believed this and a  wave of nationalisation and land reform saw the end of almost all foreign owned businesses by the 1960's and early 1970's.

Yet we did not prosper.

Indeed the country's fortunes declined further. At independence the country's economy was primarily agricultural, the most important produce being tea, rubber and coconut.  By the 1970's these were all controlled by the local population, either directly or indirectly through the state.

Sri Lanka was not alone in this experience. All over Africa and Asia the European powers retreated from their colonies but their exit did not result in a sudden increase in wealth. Many African nations, despite enormous wealth in natural resources; Nigeria, the Congo, Angola to name just three, are now poorer than they were at independence.

Meanwhile, the nations of Western Europe rebuilt from the ruins of the second world war are, despite all the problems they face now, much richer than they were at the end of the 19th Century. Countries like the United States, Australia and New Zealand, which started off as colonies prospered despite a lack of significant colonial expansion.

The answer to the question of as to how colonial powers grew rich seems a bit more complex than the simple statement that we were taught.

I believe the enormous wealth that was created in Britain between the 17th and the end of the 19th century was due to two factors: the industrial revolution and free trade.

In Britain's case  the colonies did assist trade by creating new markets in which British companies and products had preferred access. Thus British business had an advantage over other European and American companies (and any local businesses that were around) which helped them prosper. This helped but I don't think it was the key determinant of success, ultimately it was trade that created wealth.


The countries that have prospered over the last fifty years did so through increased trade, Japan and East Asia being spectacular successes. In the early 1950's the bet was that it was the African continent, with its abundant resources that would succeed, but it was not to be. Countries that looked inwards, from India until the 1990's to China until 1978, remained stagnant. Once China started to trade its fortunes improved.

At first China started trading internally. Instead of only being allowed to work on the collective farms farmers were allowed to cultivate a part of the land and sell the excess. Food production increased rapidly and soon the private produce exceeded that of the collective farms. This experiment was extended gradually to other areas of the economy and now it is the largest trading nation in the world.

If we close up to the world, try to trade only internally, a popular suggestion these days, we will be doomed. It was tried in the 1960's and 1970's it did not work; it will not work any better now.

Scenes from my childhood

I had to pay a visit to one of the company's sites today in Embilipitya. I had not realised quite how far this was, somewhere off Ratnapura and the site itself yet further into the interior.

It was pretty much off the main tourist track, the only thing of any note being an abandoned paper mill.

I enjoyed the ride on deserted, slightly bumpy rural roads, hedged on either side by a sort of semi-dry zone forest. I could not make up mind as to whether it was wet or dry zone, it was in the region of Uda Walawe so it may have been a bit of both. It took me back to my childhood memories of travel, seeing roads lined with trees, not necessarily forest, but trees, trees and trees. Lots of coconut trees, but also plaintain trees, jak trees and all sorts of wild greenery.

Buildings in rural areas were wattle and daub, thatched with coconut. Bricks and tiles were mostly in towns and for bigger buildings. Now the scenery seems dominated by signboards and glitzy glass-fronted shops.

On the way back we passed by some stalls selling curd. When I expressed an interest in buying some, my colleague who is a regular visitor to the site (it was my first visit) told me of a stall run by a family who produce it from their own herd. We stopped there and I bought a couple of pots, which turned out to be very good. Not as thick as some varieties, but with a rich creamy flavour. I was told that I needed to finish them fast, since they done use any additives. We sighted a herd of buffalo on the paddy fields as we drove past.

It struck me that the buffalo is now largely extinct, as a beast of burden. When I was little the farmers would be working their fields with buffalos, now they have been replaced almost completely by the hand tractor, just as the outrigger canoe (or catamaran) has been displaced by the motorised boat at sea.

The triangular sails of the catamarans used to dot the horizon when looking out from the seashore. Now they are only found as decorations in hotel lobbies or beach side restaurants.

I have a very good memory and I even remember seeing bullock carts and even the odd rickshaw, which used to take children to school.

That these have disappeared is a sign of progress, people are better off now and they using modern equipment, which is a good thing. A part of me however remains an incurable romantic and sight of some of these older scenes leaves wallowing in a nice, warm,  nostalgia.

There are a few nice pictures on an album on Flickr

Also picked up a few pictures from the web, for the benefit of anyone who never saw these. Hope you like them, does anyone have any colour pictures of similar scenes?

A question for all the marketing people out there on Anything.lk

Anything.lk is a daily deals website. They sell discount 'vouchers' (in electronic form) for various products and services. The Company negotiates various deals with manufacturers or service providers and offers them to their customers, less a margin.

The question is, what does Anything.lk offer that cannot be done more effectively by a bulk sms offering a discount direct to users? Or, a direct discount on a credit card offer?

In effect it's about sending a discount offer to a set base of customers. In the case of a credit card offer there is the certainty that the customer exists. There is also other information on spending patterns, which cannot (and should not be) shared at the individual level but may be used for macro level profiling.

Anything.lk only has website hits, Facebook 'likes' and records of past purchases to offer- a far more dubious proposition in my view.

I have no idea of relative costs between the two, can anyone volunteer any information?  I suspect Anything.lk's charges to be a lot higher than that a credit card provider and its customer base to be transient.

Buying a vehicle on a tax free permit? Then expect a letter from the tax department

This story was narrated to me by a friend. He had been thinking of buying a Mitsubishi Montero (for Rs.12m, on a permit) and had almost finalised the deal. He quickly backed off when a couple of his friends who had bought vehicles on permits received letters from the Department of Inland Revenue, asking for details of income.

Apparently details of anyone who registers a new vehicle, bought under a tax-free permit are sent to the Inland Revenue, who will follow up with tender inquiry as to where the buyer got the money from and whether it has been declared for income tax.

Its a bit unnerving for people but not as bad as the situation another friend faced about 6-7 years ago, when the economy was in the absolute pits. He had got married and the reception was held at a hotel, the Inland Revenue rang him up and asked him how he had paid for his wedding!

Apparently they had been diligently collecting details of booking for large parties from hotels and calling people to ask how they paid for them.

Incidentally, the company my first friend works for has just bought a new BMW X5 for their CEO. The normal duty paid price is apparently Rs.47m but on a permit, it costs Rs.20m, still a colossal sum. The permit itself, a 'minister's permit' cost Rs.8m. The company had to send the requisite information to the Inland Revenue but since they had their tax files and were filing regular returns it was not a problem.

The Inland Revenue's tactics are perfectly legal and there can be no objection to legitimate follow up sources of income. However, this should not be confined to ordinary citizens but should include ministers as well; who are supposed to declare their assets, which many have not.  

The more serious issue is the permits, a classic case of the so-called 'license raj' or rent seeking activity. High tax is charged on certain products or services but the Government then goes on to issue "tax free" or reduced tax permits to a section of the population (state employees, or more disturbingly, ministers). These permits are then sold to others, with the permit holders pocketing the a tidy profit. This is done largely with the intent of benefiting favoured constituents and is unfair by ordinary citizens. Claiming that this is done because of poor public sector pay is disingenuous.

Let ministers and public servants be paid proper salaries - allocated through the budget and transparent to all, but let them also pay normal taxes. Don't allow them to make hidden profits by changing the tax and legal codes to enable them to do so.

Another (unverified) story that I heard is that ministers are entitled to to two bus route permits and either a petrol shed permit or a liquor license. We do not know if this is true but we know for a fact that the allocation of these permits is murky and generally goes to favoured constituents. These are then sold on to people who run these businesses, which is one reason why public transport is so bad, why so many are trying to buy motorcycles, cars or trishaws and why all are inconvenienced by congestion and pollution.

Its not just a case of profits for the few, there are also wider social costs that are borne by many, not to mention the sheer hypocrisy of ranting on about the evils of liquor, while the very business is under close control of the same politicians. 

Violence against women in India: will a Pledge to the Girl Child help change attitudes?

Violence against women in India seems to be a big problem. Attitudes and culture, where women are regarded as less important than men seems to be one of the causes. Abortion of girls, female infanticide and neglect; dowries are all symptoms of this attitude.

Could a pledge help change attitudes?

This is just an idea that I am playing around with, but what if families with girls took a stand.

Unless and until, men are willing to take a pledge, to welcome, nurture and love the girl child, they will not have my daughter in marriage.

You only want boys? Then be happy and gay, be single, be a eunuch for all we care.

You want to marry?

Yes, but only if you sign up. If not, hard cheese.

There are a number of pledges around, but none that will deny marriage of their daughters, if potential grooms refuse to take and honour it.

An idea worth sharing? Let me know.

The joy of travel is dimming

I used to love to travel and in the past was the main organiser of trips for groups of friends. Bungalows on estates were a favourite destination.

I just returned from Bandarawela, we stayed a couple of days at an elegantly appointed bungalow, with a lot of history preserved, well laid out with some fine views. The food and atmosphere were excellent, so whats the complaint?

Its the drive. The roads are now a nightmare. Its not that the roads are crumbling, its just that the traffic and driving are maddening.

I always leave early and generally after getting a few miles outside of Colombo the traffic peters out and the rest of the drive is very pleasant. If one leaves early in the morning the Colombo traffic is avoided altogether and the whole drive is a breeze. There are occasional blocks in towns or a slow moving lorry or bus will hold things up for a while but that was about it.

Now, come the long weekend, half the country seems to be on the move. Many don't seem to know how to drive, wandering erratically around the road with no clear signalling and there are heaps and heaps of trishaws and "batta" vans on every single road, holding up traffic everywhere.

Until recently trishaws were generally concentrated around towns and "batta" vans did not exist; now both are found all over the main trunk roads. Add to that the aforementioned Sunday drivers who tail slow vehicles without overtaking and the trip becomes a bit like dodgem cars, constantly seeking gaps in the road trying overtake these miserable creatures.

Mind you, I was not even driving on this trip, (or on the last trip, when I first experienced the problem).

All this frustration while only doing the backseat driving, watching the road like a hawk, shouting instructions to my Uncle to overtake, overtake and keep blowing that damn horn! I couldn't even enjoy the passing scenery, usually so pleasant and almost a part of the holiday itself.

I ate far too much on this trip, especially the puddings, but I'm off now to look for more comfort food-home made bread pudding. I think I deserve it, don't you?

Government to conduct Economic Census, is this the precursor to new wealth taxes?

The lead story in today's Sunday Times, claimed that the Government was considering introducing new taxes on the rich.

This is rather worrying. Increasing rates of tax is something that takes place on a regular basis, something that we are accustomed to, even if new changes are only accepted with a weary resignation. Our affairs are adjusted to the current system, arranged, as rational beings are wont to, in whatever manner that minimses the impact of tax. Changes to the system of tax itself is another matter altogether.

When a completely new type of tax is contemplated it gives one the shudders because one does not know where it will strike. Second, as policy is generally made up ad-hoc, as things go on, there is a good likelihood of some ill-thought, unworkable or harmful tax will be foisted up on us. We have precedents, all bad,  of the type of havoc wrought by such taxes in the 1960's. The article claimed that the new tax "would apply to both those who have acquired wealth through inheritance of family property and cash, and the new-rich, a growing breed of businesspersons who have acquired wealth in recent times."

I suppose one just has to wait and see what turns up, hoping all the while for the best.

Meanwhile, an advertisement in the Sunday Observer announced a new Economic Census of industries and businesses. Businesses were requested to cooperate by providing information on numbers employed, output and assets owned. The website of the Department of Census and Statistics carries some information on the census.

Throughout history rulers have used a census for the purpose of taxation, indeed the very word is derived from the Latin word censere ("to estimate").

The question that came to mind was if this census would form the basis for this and other new taxes being contemplated? The Government is spending is far above its revenues and I think the mandarins in the Treasury have realised that revenue from existing taxes is probably near its limit so new methods to appropriate citizens wealth are required.

Unlike in the 1960's however, it is a lot easier to move money out of the country, so expect another flight of capital.

Some lessons from Singapore

The eulogy delivered by Singapore's Prime Minister for the late Goh Keng Swee has a number of points that our rulers, who periodically claim to want to emulate the City State should note.

Goh Keng Swee was Singapore's first Minister of Finance. The prudent approach to fiscal management and a commitment to sound money by Singapore's founding fathers was one of the cornerstones of their success. To quote:

"Dr Goh soon discovered that the government was almost broke, and expected a budget deficit of $14 million that year. Prudent and thrifty by nature, Dr Goh immediately introduced drastic measures to cut spending, including cutting civil service salaries. This was obviously unpopular, but Dr Goh stood firm. When he delivered the Budget at the end of the year, he proudly declared that the government had achieved a small surplus of $1 million."

Contrast that with our rulers who run massive deficits year after year, all funded by debt.

"Dr Goh next turned his attention to jump-starting the stagnant economy. He decided on a strategy of rapid industrialisation, attracting investments from MNCs to create jobs and exports. This was a radical and untested approach. It was contrary to the conventional wisdom then, that poor countries could achieve economic development through import substitution, and that MNCs were new colonial powers out to exploit impoverished workers in the Third World."

What are out leaders saying? They want to achieve self sufficiency, in milk, sugar, soybeans, maize, footwear, canned fish and whatnot. No longer is the term "import substitution" used, instead it is "self sufficiency" and support for "Sri Lankan entrepreneurs"; who are mostly cronies, the least enterprising lot who simply look for hefty taxes and subsidies that come at the cost of the consumer and  tax payer.

Apart from fiscal prudence, another of the principles that drove the founding fathers of Singapore was clean government. The PAP campaigned in white, to symbolise purity, and on being elected put in measures to stamp out corruption at all levels.

On March 7, 2013, during a congress session, Member of Parliament (MP) Sylvia Lim expressed her concern when Singapore ranked 5th on Transparency International (TI)’s Corruption Perceptions Index in 2012 and the year before. Singapore was rated joint number one in 2010. Read the story here.

Sri Lanka has been ranked No.79 and while the ministers in Singapore are concerned about the decline in their ranking and seeking ways to improve it Sri Lanka launches virulent attacks on the body and on NGO's in general.

Another overlooked factor is the importance of the rule of law. A vignette that illustrates this well is the way Lee Kuan Yew, a Cambridge educated Barrister, agonised over the appointment of a new Chief Justice when Sir Alan Rose was due to retire in 1953. The Chief Justice, he wrote, sets the tone for the whole judiciary, therefore it is is of utmost importance to select the right candidate. Interestingly, Sir Alan served as Chief Justice of Ceylon (1952-56)immediately after he retired from Singapore. The current incumbent of this office in Sri Lanka speaks volumes for the state of the rule of law in this country.

It is true that infrastructure is necessary, but it is not the most important thing. The rule of law and a functioning legal system, sound policy and an efficient and clean bureaucracy matter a lot more. They are much harder to create and sustain than big, grandiose infrastructure or smartening up the streets.

Trying to imitate Singapore is fine, but when it is done, imitate the real substance; not the obvious forms.

Panem et circenses

The Roman poet Juvenal coined this phrase, to describe a type of populist politics.

The lesson through the ages is that nobody cares about what politicians do, so long as people are well fed and entertained.

Indeed I would not mind too much myself, except that all we got was the bloody circus.

We'd like some bread now, please.


Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses.

The Satires, Juvenal

CHOGM: will we face a lock down of the city?

Perth, Australia hosted the CHOGM in 2011 and that city faced a virtual lock down, with even the police force of New Zealand joining in the security arrangements. An extra public holiday was declared (by shifting the Queen's birthday holiday back by a couple of weeks) to reduce public inconvenience.

If these were the arrangements in Australia, a place which is not security conscious in the least, the mind boggles at the thought of what arrangements will be made for Colombo.

So far, there is some speculation of a single public holiday, but nothing else. I have a feeling a good part of the roads in the centre will be closed with probably two official public holidays, but for all intents the entire week is likely to be a non-working one.

Not that I mind, I need a holiday and as I have almost no leave, any additional public holidays are only too welcome, especially since the poya in November falls on a Saturday. I just wish they would announce the holidays in advance, so that one can plan a getaway.

The Face and the Dream

For something a bit lighter, one of my favourite poems:


A LONG and frantic search it has been

To find the face to match the dream.
 
Natasha! now that the face is seen,
 
The dream recedes, it would seem.
 
Another frantic search must start apace
 
To find the dream to match the face. 

-Guy Amirthanayagam


 Some details on the author are here.

How do you solve a problem like Ranil Wickremesinghe?

It was depressing to learn that internal conflicts within the UNP have now spilled out into open violence.  It is the very last thing that we need.

The problem is with the leadership of the party. Dayan Jayatilleka presents a decent analysis of why Ranil must go, while Mangala Samaraweera explains why he feels he needs to support Ranil.

I agree with everything that Samaraweera says save his conclusion. Ranil Wickremesinghe cannot be elected, his reputation has been tarnished beyond repair and the whole party offering looks tired, dispirited and disorganised.

In political terms, Ranil has gone beyond his 'sell by' date; regardless of his intellect and abilities he cannot inspire or move people and therefore cannot lead. His time is up and he must go, as soon as possible.

The whole party apparatus is equally bad: I attended one of Eran Wickremeratne's forums on constitutional reform - it was an unmitigated disaster. They did not seem to have a clear idea of what they were hoping to achieve through public discussion, had not thought through their ideas properly, had not grasped that the public at large have no capacity to understand the intricacies of constitution making-unless the problems are simplified into real, tangible day-to-day issues, which was not done.

I came away from the meeting thinking that if this was the oppositions grand plan, the situation was beyond hopeless.

The UNP party constitution is structured in such a way that it is impossible to remove the leader, therefore the UNP'ers need to do the next best thing: walk out in a body and form a completely new party.

They need to take the core of the UNP and try to woo the few decent people in other parties. One or two walking out is not enough, there needs to be a large exodus and the new party must have enough critical mass to survive on its own. This is easier said than done, especially since there is so much money to be made by being with the Government, but there may be some who have by now put away enough to decide to take a stand on some principle.

This new party must form the core of a joint opposition, joining hands with all other opposition parties to present a single candidate. The face of the new party must be a new, technocratic one; someone who presents a break from the past, with no political baggage and can appeal to younger voters. Perhaps someone from overseas, like India's new Central Bank chief.   

Timed well and played right, this may work. The opposition needs to work fast, the next Presidential election is likely to be called in early 2014.

Residents of the Barnes Place "watta" being evicted

Heard that the people living in the Barnes Place "watta" have been asked to move. They have been given until Wednesday to move, armed guards have reportedly been stationed around the premises.

These people are squatters, the rightful owners being a Muslim family. The property was distributed to the descendents of the original owners and, according to what I have heard, some 24 members have titles to the property.

The property was once a large house and occupied an acre of land, much like the other houses in the area. Only the gateposts of the original grand structure seem to remain.

The squatters are probably the descendents of servants who worked in the house.

The rulers have long been eyeing this property and various attempts have been made in the past to evict the squatters, but they were not pursued with much seriousness. This time it looks like they mean business.

The rightful owners, should be rejoicing but they are probably not, because the last I heard, they were not going to collect a penny. 

Meanwhile, the eviction of another group of people, living opposite "Mount Mary" in Dematagoda is ongoing. The residents claim to be rightful owners, the descendents of railway employees who were given the land. They have been asked to move into flats and pay Rs.50,000 each for the priviledge, something that most cannot afford.


Update  -10th October
Heard that the squatters were paid some Rs.4m per family to vacate, a fair price in my view. I don't know if the rightful owners got anything; most probably not. In total 25 families lived in the watte.

  

Touchwood, Sri Lanka's listed Ponzi scheme and IFRS accounting

I have been biding my time for some years, patiently waiting for Touchwood to collapse. That it was a Ponzi scheme was immediately obvious from a glance at the prospectus that they issued when they listed, somewhere in 2001. I spent some time trying to explain this to people but after making little headway, except amongst friends, gave up.

The benefit of listing is the transparency that results: companies are required to publish accounts and if used correctly can prove to be a useful source of information. Thus a scam that could have lain hidden for years was exposed.

As I recall, the things that raised my suspicions at the time were:

1. The first auditors, a well known firm were sacked after the very first year and an unknown firm appointed. The reason for the sacking? The auditors had qualified their opinion, stating that they were unable to verify preliminary expenses! Sacking an auditor is an action that arouses immediate suspicion, when it is done for something as trivial as this, one knows that something fishy is going on.
   
2. The directors never invested in the shares of the company. Initial expenses were funded through a directors loan (which could be repaid at will. Share capital cannot be returned). Why were the directors unwilling to invest in their own company? To be sure, there was quite a large sum appearing in the accounts as issued share capital but they had not been issued for cash. Instead these were free "bonus" shares that were issued by revaluing the trees that the company supposedly owned.
   
3. The Company did not recognise the liability for the deposits being accepted - they were instead treated as income and the cash raised used for expenses.
   
4. The publicity material promised supposedly "guaranteed" returns as in a bank deposit- on an investment in a commodity. No one can ever promise guaranteed returns on such an investment as no one has the ability to predict where commodity markets are going to head, especially over a 15 year period. People can invest, but they must know the risk that they take is on the commodity market and there can be no guaranteed returns.
   
5. They were promising people a title to a tree, some of which was on rented land. Does such a title confer any valid claim under the law?  
   

In response to criticism  some of these were later changed, land was supposedly offered and the liabilities were recognised on the balance sheet (under IFRS) accounting rules. The fundamental scheme however , built on unrealistic promises and designed to defraud, did not change.

That the regulators and the auditors did not recognise it as such is a question that needs to be asked, but ultimately it is only we who must be responsible for our actions and for people who wanted to know, enough information was available. At the time, I was very annoyed that the CSE would allow such a scam to list and I complained (informally) to both the CSE, and later the SEC but with hindsight, at least the disclosure requirements of the CSE served some good purpose.

In general, do not rely on a regulator or still less, the Government. When it comes to investing it is safer to take the attitude of "guilty until proven innocent" and avoid any investment scheme that one does not understand fully.

The Australian regulator has a useful guide to investment scams. Another useful guide is here. Under normal circumstances I would also have added that one should talk to a trusted financial advisor or accountant as well, but in this instance given the embarrassment that the auditor was duped as well, one is rather hesitant to make this recommendation.

The problem with the auditor has something to do with the fact that they seemed to have believed that Touchwood would be an excellent test case to prove the value of IFRS, the new system of accounting that I dislike. IFRS has some merits but goes overboard on a lot of things and does much to complicate the life of the accountant while generating some pretty useful consultancy work for auditors.

My biggest grouse with IFRS is that they have abandoned the fundamental accounting concept of "prudence" and it is now possible to recognise on the income statement unrealised (and in the case of Touchwood what would prove to be unrealiseable) gains. I have no problem with making provisions for potential losses, but gains, unless real must never be recognised.

This was the basis of Touchwood's accounting. Had this been an honest forestry scheme, one would have the assets-the trees to fall back on. If the Company had planted the correct number of trees and had in place the insurance policies and the extra trees (supposedly planted to deal with fluctuations) the investors would have been left with a stock of trees that could have been disposed of. They would have earned a profit or a loss, depending on how the market for teak had performed.

Since the scheme was obviously set up to defraud there is very little left in the way of trees or anything else of saleable value, the money being siphoned out by the owners. In other words, another “Golden Key” case.

People who have money in other forestry/plantation schemes should beware, this country is a haven for crooks and criminals, many who start such things do so with the same intent as Touchwood.The same goes for finance companies-read the ratings reports issued by Fitch or RAM, available on their websites and study their accounts beore investing. One also needs to read the definitions of the ratings in order to understand them, the scoring sustem differs from agency to agency.

As for the auditors, having previously signed off on the accounts of the failed Pramuka Bank, Hayleys MGT (which reported a massive fraud) perhaps they need to ask themselves some commonsense questions?

Court Jester - not accessible via SLT?

I seem to be having some difficulty accessing my blog through SLT. It works if one goes through a proxy or accesses it via some other provider. Can anyone tell me if it can be accessed through Mobitel?

Revisiting the Arab Spring: Revolutions and liberty

The last time I looked at the Arab Spring I was not particularly hopeful of the prospects of the revolution resulting in a democratic form of Government.

About two years on the situation in Libya seems quite dreadful so at least one conclusion is clear: a repressive state is probably better than complete anarchy. Neither is desirable but in a repressive state ordinary citizens are only under threat from the state and its agents.

In a situation where the state collapses through a popular revolution there are likely to be many different militias competing for power. Unless one group is firmly in charge, citizens may be under threat on several fronts instead of from one monolithic entity. Services collapse and with no one to hold the ring, things degenerate  into a free-for-all.

Therefore the crucial factor is some form of orderly transition. Ideally a dictator should be deposed  in a backroom deal, where he or she leaves quietly and a transitional leader takes over. How can this be engineered?

The problem is that dictators are deaf to the concerns of the public and resist any attempts at correction. Unrest mounts, frustrated people take to the streets and the resulting mass revolution brings too many actors and competing interests to the table.

Bad leaders need to be persuaded to leave quietly, more sane advisers within the inner ruling circle need to read the signs and work together to persuade a ruler to leave. This is what seems to have happened in the transitions in Eastern Europe. (see also here)

One deposed, the trickier process of institution building must begin.

The liberty of citizens can only be guaranteed by institutions, but building these from scratch can take, literally a generation or two. It is possible to build them faster, depending on the extent of any foundations that may exist, the best being any left in the wake of the British Empire.

The attitude of the people will also help. A friend once explained that he felt that the people of Eastern Europe looked to Western Europe as a model and were willing to accept Western European help in building institutions.

Their people were not distracted by devious rulers proclaiming "monarchical democracy", "no party democracy" or some mysterious "Asian Way". These distractions need to be identified and countered early and constantly, to focus public opinion on the real issues of liberty and governance. Education, beginning initially with the elites, who may be woefully ignorant, is a must for this to be successful.

Transitioning from dictator ship is a complex and delicate process that is all too easy to get wrong. Identifying competent people who can persuade the leader to go and serve in a transitional government; a commitment to institution building, with outside help if necessary are factors that can make a crucial difference to the ultimate outcome.  

What does the Northern Provincial Council election tell us?

Much acrimony and confusion surrounds the impending Northern Provincial Council election. Its quite wearying to wade through the issues and controversies but the process itself exposes a few truths.

That it was with much reluctance that the Government went ahead with it is obvious. It was long overdue and they had resisted all previous calls to hold the polls. Local events being unchanged, it is most likely therefore, that foreign pressure, more effective these days because of the upcoming CHOGM conference that caused the poll to be called. The fact that we must rely on external forces to hold a Government to its constitution says a lot about the state of Governance.

There has been scare mongering by the Government about the Provincial Councils but  this has not barred it from holding similar elections elsewhere. In many instances they have been called early, signalling a positive eagerness on the part of the Government. Why then the special problem with the Northern province?

If the system itself seems acceptable by the Government in other provinces, the only problem must be the Tamils. It is not a provincial council per-se that is the issue, it is a Tamil provincial council. This exposes the latent  suspicion that the GoSL has of the Tamils. The question is, if there is so little trust can any meaningful relationship exist?

The controversial proclamations by the TNA, which are apparently popular, expose the fault-lines that exist within society. All this time they lay hidden, beneath the happy veneer being painted by the propaganda. Now exposed, no one seems to be posing the fundamental question as to where the reconciliation stands.

Right or wrong, there appears to be yawning chasm in expectations. Has this widened or diminished since the war? We have absolutely no idea. 

This leads to the conclusion that basic questions have not been addressed properly. If no resolution has taken place, will these not resurface? Is the only solution a suppression of the issues? Is this what reconcilation and normalcy is about?

A sensible Government should be asking themselves some serious questions. Unfortunately, no one, least of all the Government, seems to be doing this.


 



  

On building Pleasure Gardens and austerity measures

The kings of old built pleasure gardens for their own use and amusement. The exact purpose they served is not certain but were probably used for hunting, games and ceremonial purposes. King Wickramabahu III was apparently the first monarch associated with gardens when he built one in 1371. Later ones followed suite.

Under the evil colonials such great traditions died out but what joy filled my heart when I read that these were to be resurrected, in the very city of the colonials. What better way to teach those foreign devils a lesson? 

More soberly, a smaller story  announced new austerity measures. 

We live in hard times and the yawning budget deficit has necessitated a tightening of the screws (or is it thumbscrews?)

The all-round austerity measures also include further curbing public expenditure while increasing taxes and reducing subsidies or doing both. This came as debt servicing costs rose by three per cent more than state revenue, a senior government official told the Sunday Times. If the new measures were not resorted to, the Treasury would be forced to go for more borrowings to cover government expenditure which would then lead to more debt servicing, the official added.  

Purely from an economic point of view, cutting expenditure on one side, increasing it on another side; to finance the Pleasure Garden, serves little purpose.

In economic terms all that is happening is a reallocation of resources; presumably from areas of low priority to those of greater importance.

Apart from the priorities, there are other questions that come to mind. Why is the Telecommunications Regulatory Authority doing this? It has nothing to do with its function or responsibilities. Are gardners or architects in charge of the TRC?

No, the answer is that the TRC has an increasingly scarce resouce: some spare money. Instead of contributing this towards bridging the existing deficit they instead choose to spend it on a project. Why so?

Because the spending enables the building contractor to make money. Funding the deficit will bring no joy to the rulers (although it may bring some relief to the people) but new expenditure opens new possibilities for personal enrichment and gratification.

Moreover the spending need not be restricted to the funds actually available at the TRC, the TRC can also borrow. The advatage that this offers is that such debt is not recorded as Government debt.

Thus the Government can claim that the debt to GDP ratio (a measure of the sustainability of Government debt) is declining, while actually increasing its borrowings. This is something that the rating agencies have warned about, although all the implications of this may have been missed by the public-at-large. Naturally such grim warnings are viewed as being the work of spoilsports, attempting to ruin the party, so it drew a sharp rebuke from the Central Bank.

Anyway, the path to reclaiming our ancient glory is clear, all one need do is discard the colonial mindset and assume one from some long dead king. This is evident here.

While we await the Pleasure Gardens in Colombo we can visit the one built in Mirijjawila in the Hambantota district. I have not seen it yet, would someone who has visited share a few pictures?