It is reported that President Rajapaksa will not be attending the UN General Assembly this year but no real explanation has been offered. People, including myself, often think that nothing much happens at the UN summit but Yahoo News offers six good reasons why this summit is worth watching.
Regardless of anything else, it is the main meeting of the UN and many world leaders will attend. Judging by past behaviour, the President himself attaches huge import to the meeting, he has never missed one before and his address to the UN GA is widely reported and closely followed in Sri Lanka. The official statement that "this is not the first time, previous Presidents like J. R. Jayewardene
and Chandrika Kumaratunga had also sent representatives to address the
UNGA” does not ring true.
This raises the obvious question: why is he missing it this time around? The President is always keen to raise the country's profile and project its 'soft power' and has traveled extensively to further this cause. Earlier this year he attended the UN conference on Sustainable development in Rio and also took time to visit Cuba. Pictures show a smiling President chatting with various world leaders.
Has the relationship with the UN soured since then or is he in ill health?
There was the unfortunate case of the UN resolution in March this year as a consequent of which we had the delegation from the United Nations Office of the High Commissioner of Human Rights (OHCHR) visiting this month. Critics seem to think that things are not going swimmingly on that front either and the actions of the Government seem to confirm this view: witness the new diplomatic strategy of opening missions in Africa and South America, with the hope of garnering their votes at the next session of the UNHRC. The country has already paid host to visits from the Presidents of Seychelles and the Maldives and the King of Swaziland, so this strategy is already in the process of being executed.
Perhaps he is preoccupied with domestic concerns? The Provincial Council elections were just concluded and there is speculation that the Provincial Elections are only a precursor to the big event - the Presidential election. Could we be in for a Presidential election in early 2013 or perhaps 2014? Certainly the Presidential poll of 2010 was preceded by the Provincial Council elections in April, August and October 2009. As Gomin Dayasiri argues, the Provincial Council is a test bed of opinion and victory there enables the President to create a "wave" - politicians-and the providers of election funds-are keen to back the winning horse so victory at the Provincial level forms a good stepping stone to bigger things. Either way, we are in for some interesting times.
Wednesday, September 26, 2012
Sunday, September 23, 2012
How Times Have Changed - Joseph Portelli's tribute to his father
The Australian-Maltese singer-songwriter Joseph Portelli has written a beautiful song, a touching tribute to his father who was suffering from Alzheimer's disease. Watch it here. And if you are as moved, as I was, please think of other sufferers from this dreadful disease and donate to the Lanka Alzheimer's Foundation.
If you wish to buy the song (proceeds go to Alzheimer’s Disease International and national Alzheimer associations worldwide) you can do so here.
If you wish to buy the song (proceeds go to Alzheimer’s Disease International and national Alzheimer associations worldwide) you can do so here.
Friday, September 21, 2012
Fredrica Jansz, editor of the Sunday Leader, sacked
Just heard that the editor of the Sunday Leader has been sacked. The news is on various websites and is already attracting some comment. This can mean only one thing: one less critical source of information.
I have said before that I do not consider the Sunday Leader to be the best of papers but they do carry same good information. It's importance has also grown, especially with the dumbing down of previously good newspapers. The Daily Mirror is a grotesque travesty of its former self, yet, incredibly enough, is still the best English daily around. The Sunday Times has suffered less, but is palpably tamer. Even the Sunday Island, is less interesting than it was.
Worldwide people have been proclaiming the end of print media, unfortunately in Sri Lanka the new media of the internet died even before the old media.
People are going to be very hard pressed to find any information at all. Even an information junkie like me has got to trawl all over the web to find anything and most days now I simply don't have the time. It feels like playing blind man's buff, in everyday life. Or perhaps like sheep, being lead to the slaughter.
I have said before that I do not consider the Sunday Leader to be the best of papers but they do carry same good information. It's importance has also grown, especially with the dumbing down of previously good newspapers. The Daily Mirror is a grotesque travesty of its former self, yet, incredibly enough, is still the best English daily around. The Sunday Times has suffered less, but is palpably tamer. Even the Sunday Island, is less interesting than it was.
Worldwide people have been proclaiming the end of print media, unfortunately in Sri Lanka the new media of the internet died even before the old media.
People are going to be very hard pressed to find any information at all. Even an information junkie like me has got to trawl all over the web to find anything and most days now I simply don't have the time. It feels like playing blind man's buff, in everyday life. Or perhaps like sheep, being lead to the slaughter.
Wednesday, September 19, 2012
Budget for 2013 commences...
As expected, the first installment of the budget for 2013 was announced at midnight yesterday. Taxes on canned fish were increased by Rs.25 per can and taxes on potatoes by Rs.20 a kg. The commodity levy now stands at Rs.50 on a kilo of potatoes and Rs.75 on a can of fish. These special commodity levies are over and above the VAT of 12%, the Ports & Airports Levy and Nation Building tax that are applied to all imports, which means the total tax is in fact a lot higher than the above figures. Customs duty, if applicable, is over and above this lot.
A spokesman claimed that this was to protect farmers but informed observers are aware that this is nothing of the sort, just another tax to feed the bloated state machinery. The Customs website has a list of the recent changes to tariffs that is worth reading, just to know how much is being extracted from consumers.
The timing was also in line with expectations, shortly after the end of the provincial council election and just before the start of the T20 cricket matches. Expect further installments of the budget around important matches. Consumers would do well to stock up on arrack, cigarettes and dry rations over the next week or two, you will save some money.
The closing line in the announcement that "the country has been reached self sufficiently in production of rice and maize and local farmers have been encouraged to provide above goods in order to meet 50% of local consumption requirements" is laughable and not just for the atrocious English.
Local maize, of inferior quality (because the climate is not right) is twice the cost of imported maize, which explains why chicken prices are so high (maize is the principal ingredient in poultry feed). Meanwhile with water diverted to feed the industrial scale maize farming (under the control of politicians who skim the profits) ordinary farmers are left without water. This is also the problem with the inefficient local sugar production (where new taxes have also been imposed, to "protect the local farmer-ie politician). The extent to which agriculture is now under the control of politicians is amazing, a worthy subject of further study.
Analysts in the meantime will need to start the tedious business of tracking the "budget", one gazette notification at a time over the budget season, which will end in the first week of November. The second season of the " budget" starts in March or April, depending on what the sporting calendar holds and the prevalence of the long weekends. What better time to introduce a tax than when a lot of people are busy arranging a holiday?
The treasury has mastered the art of taxation by stealth, but the shroud is beginning to wear rather thin and one wonders when the public at large will see through the whole charade.
Parliament, in the meantime is fast asleep. Should someone wake them up, to remind them what their their role should be?
-Updated-
A spokesman claimed that this was to protect farmers but informed observers are aware that this is nothing of the sort, just another tax to feed the bloated state machinery. The Customs website has a list of the recent changes to tariffs that is worth reading, just to know how much is being extracted from consumers.
The timing was also in line with expectations, shortly after the end of the provincial council election and just before the start of the T20 cricket matches. Expect further installments of the budget around important matches. Consumers would do well to stock up on arrack, cigarettes and dry rations over the next week or two, you will save some money.
The closing line in the announcement that "the country has been reached self sufficiently in production of rice and maize and local farmers have been encouraged to provide above goods in order to meet 50% of local consumption requirements" is laughable and not just for the atrocious English.
Local maize, of inferior quality (because the climate is not right) is twice the cost of imported maize, which explains why chicken prices are so high (maize is the principal ingredient in poultry feed). Meanwhile with water diverted to feed the industrial scale maize farming (under the control of politicians who skim the profits) ordinary farmers are left without water. This is also the problem with the inefficient local sugar production (where new taxes have also been imposed, to "protect the local farmer-ie politician). The extent to which agriculture is now under the control of politicians is amazing, a worthy subject of further study.
Analysts in the meantime will need to start the tedious business of tracking the "budget", one gazette notification at a time over the budget season, which will end in the first week of November. The second season of the " budget" starts in March or April, depending on what the sporting calendar holds and the prevalence of the long weekends. What better time to introduce a tax than when a lot of people are busy arranging a holiday?
The treasury has mastered the art of taxation by stealth, but the shroud is beginning to wear rather thin and one wonders when the public at large will see through the whole charade.
Parliament, in the meantime is fast asleep. Should someone wake them up, to remind them what their their role should be?
A key role of Parliament, and of the House of Commons in particular, is to hold the Government to account for expenditure. The Government intends to make it easier for Parliament to do so by improving the transparency and accountability of Government expenditure, in line with recommendations from the House of Commons Treasury Committee" (The Governance of Britain, Green Paper on constitutional reform, 2007)
-Updated-
Saturday, September 15, 2012
Telemann - Concerto for 4 solo guitars
Came across this quite by accident. The transcriptions works surprisingly well, I assumed it must originally have been written for lute, but apparently it was for the violin. Makes for very interesting listening, the ear being constantly teased by the contrapuntal textures, try it on Youtube.
Monday, August 27, 2012
Work is worship - A response to Hemantha Warnakulasuriya
Azrael has reproduced a letter written by Hemantha Warnakulasuriya, Sri Lanka's former ambassador to Italy.
Although I think he means well there are many things that I find problematic with Mr Warnakulasuriya's analysis.
The majority of migrants to the West, be they from SE Asia, India or Sri Lanka have done very well. There have been failures too but on the whole many have succeeded. It does not matter where they come from, if they have the basic skills and are provided with the right incentives, people will succeed.
I think there is a huge problem in the North and East now-the deterioration of the work ethic and the lack of basic skills.
A friend told me that he had heard from another friend that a company had set up a hotel project in the East. They had hired local staff but they had proved to be impossible to work with. They had very limited attention spans, were unable to follow simple instructions and were very slow to learn. Ultimately they gave up and employed people from the South to man the place.
I know that a top garment manufacturer opened a factory in Punani shortly after the end of the war. The productivity was abysmal. Whenever there was a wedding the whole staff would go off for a couple of weeks. They tried to restructure the factory many times, downsized it, ultimately gave it the most simple T shirts to make but it did not work out. They moved it to Batticaloa where things are a somewhat better, but its still not at top notch. They are keeping the factory going, partly because they feel they should do something to create employment but it is not possible to revive a region purely on the basis of charity.
There is an entire generation there that has been living on handouts, have not had proper jobs or education and have been traumatised by war. God only knows what psychological problems they have.
This is a huge issue that needs to be tackled as part of a proper system of rehabilitation but the GoSL simply ignores it and concentrates on building roads and few public buildings. The physical infrastructure is the easy part, the soft skills are the hard part and not a lot seems to be happening on that front.
Fortunately the people there still seem to be going abroad, many to Australia but of late the GoSL seems to be apprehending them and sending them back.
They need to be either rehabilitated and brought into mainstream society or allowed to leave. Keeping them penned in is to create a tinderbox.
The point of the long ramble is to say that Tamils are not necessarily more hardworking than anyone else. With the right policies and good governance anyone can succeed.
Although I think he means well there are many things that I find problematic with Mr Warnakulasuriya's analysis.
The majority of migrants to the West, be they from SE Asia, India or Sri Lanka have done very well. There have been failures too but on the whole many have succeeded. It does not matter where they come from, if they have the basic skills and are provided with the right incentives, people will succeed.
I think there is a huge problem in the North and East now-the deterioration of the work ethic and the lack of basic skills.
A friend told me that he had heard from another friend that a company had set up a hotel project in the East. They had hired local staff but they had proved to be impossible to work with. They had very limited attention spans, were unable to follow simple instructions and were very slow to learn. Ultimately they gave up and employed people from the South to man the place.
I know that a top garment manufacturer opened a factory in Punani shortly after the end of the war. The productivity was abysmal. Whenever there was a wedding the whole staff would go off for a couple of weeks. They tried to restructure the factory many times, downsized it, ultimately gave it the most simple T shirts to make but it did not work out. They moved it to Batticaloa where things are a somewhat better, but its still not at top notch. They are keeping the factory going, partly because they feel they should do something to create employment but it is not possible to revive a region purely on the basis of charity.
There is an entire generation there that has been living on handouts, have not had proper jobs or education and have been traumatised by war. God only knows what psychological problems they have.
This is a huge issue that needs to be tackled as part of a proper system of rehabilitation but the GoSL simply ignores it and concentrates on building roads and few public buildings. The physical infrastructure is the easy part, the soft skills are the hard part and not a lot seems to be happening on that front.
Fortunately the people there still seem to be going abroad, many to Australia but of late the GoSL seems to be apprehending them and sending them back.
They need to be either rehabilitated and brought into mainstream society or allowed to leave. Keeping them penned in is to create a tinderbox.
The point of the long ramble is to say that Tamils are not necessarily more hardworking than anyone else. With the right policies and good governance anyone can succeed.
Sunday, August 26, 2012
The basic rule for travel in Sri Lanka
I like travelling around the country and have organised many a journey with my friends. When planning a journey of more than two or three hours, there is one golden rule I think should always be followed: leave the city early.
This is something that I learned first from my grandfather's travel arrangements, he would have departed a long time before we woke up and we would wonder where he went in the middle of the night. When we were older and were taken on trips the time of departure was usually about 4.30am or 5am. As children waking up early added an extra element of excitement and mystery to the trip.
As I grew older and started travelling with friends it seemed only natural that the same rule was followed. When driving one realises the benefits of an early departure: avoiding the traffic and the heat of the day. It is good to get a good part of the journey done by about 8am in the morning, before the tropical sun makes the journey uncomfortable.
In the days before air conditioned cars this was very important and now, even with the benefit of air conditioning, extended travel in the afternoon heat can be very tiring.
All my friends thought on the same lines and I assumed that this was the way in which everyone travelled. Friends from abroad however are quite aghast at the thought of leaving this early in the morning. For them, 6am is early and 5am, a very reasonable start by our standards quite alarming.
There is something very pleasant about an early morning drive; the cool morning air, the deserted streets. Watching the soft light of dawn brighten the rural countryside, breakfast by some wayside tea shop, these are all the delights of an early morning start. We would stop for breakfast somewhere between 7.30am and 8.30am, depending on the length of the journey and the availability of some desirable breakfast spot. Post breakfast, we would be driving in normal daytime traffic but by that time we would be well into the rural areas where traffic is light and the driving more sane so there is no strain on the car or the nerves of the driver.
There is another option that is sometimes used: night travel, where the journey starts some time in the evening and one drives into the night. I have tried this once or twice but never liked it. Although it is still cool enough it is not as cool as the early morning. There is a lot more traffic and as most of the roads are either unlit or not properly lit, its a lot more of a strain to drive and more dangerous. There is also the added danger of falling asleep at the wheel which can happen on a long drive.
Does everybody like the early morning start or am I a minority here ?
This is something that I learned first from my grandfather's travel arrangements, he would have departed a long time before we woke up and we would wonder where he went in the middle of the night. When we were older and were taken on trips the time of departure was usually about 4.30am or 5am. As children waking up early added an extra element of excitement and mystery to the trip.
As I grew older and started travelling with friends it seemed only natural that the same rule was followed. When driving one realises the benefits of an early departure: avoiding the traffic and the heat of the day. It is good to get a good part of the journey done by about 8am in the morning, before the tropical sun makes the journey uncomfortable.
In the days before air conditioned cars this was very important and now, even with the benefit of air conditioning, extended travel in the afternoon heat can be very tiring.
All my friends thought on the same lines and I assumed that this was the way in which everyone travelled. Friends from abroad however are quite aghast at the thought of leaving this early in the morning. For them, 6am is early and 5am, a very reasonable start by our standards quite alarming.
There is something very pleasant about an early morning drive; the cool morning air, the deserted streets. Watching the soft light of dawn brighten the rural countryside, breakfast by some wayside tea shop, these are all the delights of an early morning start. We would stop for breakfast somewhere between 7.30am and 8.30am, depending on the length of the journey and the availability of some desirable breakfast spot. Post breakfast, we would be driving in normal daytime traffic but by that time we would be well into the rural areas where traffic is light and the driving more sane so there is no strain on the car or the nerves of the driver.
There is another option that is sometimes used: night travel, where the journey starts some time in the evening and one drives into the night. I have tried this once or twice but never liked it. Although it is still cool enough it is not as cool as the early morning. There is a lot more traffic and as most of the roads are either unlit or not properly lit, its a lot more of a strain to drive and more dangerous. There is also the added danger of falling asleep at the wheel which can happen on a long drive.
Does everybody like the early morning start or am I a minority here ?
Friday, August 24, 2012
Where do Sri Lankans go on holiday?
This is a question that was posed to me by a Sri Lankan friend who now lives overseas. She was visiting Sri Lanka and was going to travel around the country. She was quite shocked by the prices that hotels and bungalows were quoting. Surely ordinary Sri Lankans could not afford to spend so much?
I have just spent the morning on the web and the telephone trying to track down a reasonable place but with almost no success. At one time a renting a bungalow and taking ones provisions along was a a cheap option. Although it is still affordable it is no longer cheap.
The rate for the Thotalagala bungalow that I stayed in about eleven years ago has jumped from Rs.8000 per night (for the whole bungalow) to Rs.30,000 a night. At that time Thotalagala was the most expensive bungalow by far, now if one can find one for Rs.10,000 a night one has to be very lucky. A cheap bungalow that I stayed in twelve years ago at Rs.2000 for the whole bungalow was being rented at Rs.8000 a couple of years back. It is now withdrawn from public bookings, reserved for the chairman of the JEDB.
The other consideration now is the cost of petrol which can add a good 10,000-15,000 to the total trip, per vehicle.
So where DO Sri Lankan go for on an affordable holiday?
I have just spent the morning on the web and the telephone trying to track down a reasonable place but with almost no success. At one time a renting a bungalow and taking ones provisions along was a a cheap option. Although it is still affordable it is no longer cheap.
The rate for the Thotalagala bungalow that I stayed in about eleven years ago has jumped from Rs.8000 per night (for the whole bungalow) to Rs.30,000 a night. At that time Thotalagala was the most expensive bungalow by far, now if one can find one for Rs.10,000 a night one has to be very lucky. A cheap bungalow that I stayed in twelve years ago at Rs.2000 for the whole bungalow was being rented at Rs.8000 a couple of years back. It is now withdrawn from public bookings, reserved for the chairman of the JEDB.
The other consideration now is the cost of petrol which can add a good 10,000-15,000 to the total trip, per vehicle.
So where DO Sri Lankan go for on an affordable holiday?
Thursday, August 23, 2012
Tourists arrested
According to the Daily Mirror a group of tourists were given a suspended sentence for taking photographs while posing in an unbecoming manner in front of a Buddha statue.
The charges in such instances are apparently brought under the Vagrants Ordinance, which was originally intended to deal with beggars and vagrants who were a nuisance to the public. It is a bit of a stretch, to my mind, to charge people for taking photographs under this law, but hey this is Sri Lanka where things are beginning to look rather surreal.
Knowing how slow the procedure is I wonder how long it took for them to be produced in court? Were they arrested and held in custody or were they released on bail? Either way the experience must have been fairly traumatic, but more so if they were held in jail.
The other interesting fact is the righteous attitude of the studio manager who reported the tourists. Truly a card carrying member of the ThinkPol.
It was only earlier this week that the Daily Mirror reported the indignation with which the External Affairs Ministry said that it will challenge a recent travel advisory that warned of an upsurge of nationalism, sexual offences and anti-western rhetoric in the country.
This incident only serves to confirm the validity of that advisory.
Great marketing Sri Lanka Tourism.
Note: For anyone interested the full advisory is here. BBC report on the incident here.
The charges in such instances are apparently brought under the Vagrants Ordinance, which was originally intended to deal with beggars and vagrants who were a nuisance to the public. It is a bit of a stretch, to my mind, to charge people for taking photographs under this law, but hey this is Sri Lanka where things are beginning to look rather surreal.
Knowing how slow the procedure is I wonder how long it took for them to be produced in court? Were they arrested and held in custody or were they released on bail? Either way the experience must have been fairly traumatic, but more so if they were held in jail.
The other interesting fact is the righteous attitude of the studio manager who reported the tourists. Truly a card carrying member of the ThinkPol.
It was only earlier this week that the Daily Mirror reported the indignation with which the External Affairs Ministry said that it will challenge a recent travel advisory that warned of an upsurge of nationalism, sexual offences and anti-western rhetoric in the country.
This incident only serves to confirm the validity of that advisory.
Great marketing Sri Lanka Tourism.
Note: For anyone interested the full advisory is here. BBC report on the incident here.
Saturday, August 11, 2012
Sri Lanka's boat people
There was a report on television yesterday that yet another boatload of illegal migrants to Australia had been caught by the navy. The lawyer appearing for the illegal immigrants said that the people were uneducated fishermen who did not know the dangers of the long voyage to Australia.
I was a bit surprised by this; why, I wondered are fishermen leaving? Has the fishing industry deteriorated so much that fishermen are leaving in droves?
This particular boat had left from Wennappuwa on the Negombo coast, so I rang a friend who lives in the area to ask what he knew of this.
What he had heard was that the migrants were not really fishermen, they were from all walks of life and from all races, Sinhalese and Moors as well as Tamils. Australia has vast coastline and some areas in the North of Australia have a climate similar to Sri Lanka, so people feel at home. Given the large extent of coast, it is relatively easy for a boat to land undetected and its passengers to melt into the landscape.
Life for the migrants is generally good. The friend I spoke to had been introduced so a group of Sri Lankan illegal migrants in New York. One of them had been a waiter in the hotel and had recogised the Sri Lankan name and struck up a conversation. He in turn had introduced him to members of underground Sri Lankan society who had entertained him lavishly. That particular group were some 30 JVP'ers who had fled in 1988/1989 but were enjoying life in New York. They all did menial jobs as waiters, cleaners and the like, although some of them had been to university and one happened to be an engineer. I asked him whether he thought they had shed their Marxist ideology, he thought they had not but they were very happy with their lot and their only aim was to try and and get legal status. Unfortunately my friend was not able to help.
Australia seems to hold a similar attraction. People, even in low paid work, can enjoy a better life than at home and when tales of success trickle back more people line up to leave. According to my friend, he had heard that around 4,000 people from Chilaw alone had landed in Australia.
This may also explain a dilemma that firms face- difficulties with hiring staff at the low end of the scale. Nobody, not even someone who has only O Levels, wants to take a job that pays less than 15,000-20,000 a month, many want even more. Employers find it difficult to pay more and are mystified by this attitude, putting it down to pride. The high cost of living is probably nearer the truth and when there is the possibility of going abroad, legally or illegally, why take up a low paid job at home?
I was a bit surprised by this; why, I wondered are fishermen leaving? Has the fishing industry deteriorated so much that fishermen are leaving in droves?
This particular boat had left from Wennappuwa on the Negombo coast, so I rang a friend who lives in the area to ask what he knew of this.
What he had heard was that the migrants were not really fishermen, they were from all walks of life and from all races, Sinhalese and Moors as well as Tamils. Australia has vast coastline and some areas in the North of Australia have a climate similar to Sri Lanka, so people feel at home. Given the large extent of coast, it is relatively easy for a boat to land undetected and its passengers to melt into the landscape.
Life for the migrants is generally good. The friend I spoke to had been introduced so a group of Sri Lankan illegal migrants in New York. One of them had been a waiter in the hotel and had recogised the Sri Lankan name and struck up a conversation. He in turn had introduced him to members of underground Sri Lankan society who had entertained him lavishly. That particular group were some 30 JVP'ers who had fled in 1988/1989 but were enjoying life in New York. They all did menial jobs as waiters, cleaners and the like, although some of them had been to university and one happened to be an engineer. I asked him whether he thought they had shed their Marxist ideology, he thought they had not but they were very happy with their lot and their only aim was to try and and get legal status. Unfortunately my friend was not able to help.
Australia seems to hold a similar attraction. People, even in low paid work, can enjoy a better life than at home and when tales of success trickle back more people line up to leave. According to my friend, he had heard that around 4,000 people from Chilaw alone had landed in Australia.
This may also explain a dilemma that firms face- difficulties with hiring staff at the low end of the scale. Nobody, not even someone who has only O Levels, wants to take a job that pays less than 15,000-20,000 a month, many want even more. Employers find it difficult to pay more and are mystified by this attitude, putting it down to pride. The high cost of living is probably nearer the truth and when there is the possibility of going abroad, legally or illegally, why take up a low paid job at home?
Friday, August 10, 2012
The Nigerian scam, now with the IMF and World Bank
I was rather amused when a friend forwarded this:
From: United Nation
[mailto:infos@unitedNation.org]
Sent: Friday, August 10, 2012 4:47 AM
Subject: Update
Sent: Friday, August 10, 2012 4:47 AM
Subject: Update
On
behalf of the entire Staff of the United Nation and the Federal Government of
Nigeria in collaboration with IMF and World Bank. We apologise for the delay of
your Contract Payment and all the Inconveniences you encountered while pursuing
this payment. However,from the Records of outstanding Contractors due for
payment with the Federal Government of Nigeria, your Name and Company was
discovered as next on the list of the outstanding Contractors who have not yet
received their payments. I wish to inform you now that the square peg is now in
square hole and your payment is being processed and will be released to you as
soon as you respond to this letter. Also note that from the record in my file,
your outstanding Contract Payment is US$5,700,000.00 (Five Million Seven
Hundred Thousand United States Dollars). Kindly re-confirm to me the
followings: Your Full Name: Your Complete Address (Physical Address with Zip
Code not P.O.BOX) : Name of City of Residence: Country: Direct Telephone
Number: Mobile Number: Nearest airport: Working Identity Card/Int'l Passport:
Occupation: Position: As soon as the above mentioned details are received, your
payment will be made to you via diplomatic courier delivery inaccordance to
World Bank and IMF recommendations. A diplomat with international travel
immunity will be contracted to deliver the funds at your doorstep. YOURS
SINCERELY, Smith Murry(BSC) Funds Delievery Unit
Technically termed an advance fee fraud, it is a very old scam, originating in the 1980's according to Wikipedia. The surprising thing is that will all the exposure the scam has got, people still keep falling for it, the fact that the scammers keep using the same technique is proof enough of this.
It is a combination of greed and gullibility that makes the scam workable, the right combination of these characteristics results in a suspension of that all too rare commodity, common sense.
Speaking of which, the Ponzi scheme listed on the Colombo Stock Exchange should start getting into difficulties within the next, oh five years or so. It may prompt a revisit of the more absurd aspects of IFRS accounting as well, I think.
Thursday, August 02, 2012
Mandela's approach to reconciliation
As a result of my last post, I started flipping through Meredith's The State of Africa and came across the chapter on South Africa under Mandela. Some may have heard of his support for the Springboks rugby team and most would have heard of the Truth and Reconciliation Commission. There was more, however. Thought this was worth sharing:
There are plenty of differences between the situation in South Africa and in Sri Lanka, the LTTE were undoubtedly a villainous group of terrorists, with no redeeming qualities whatsoever, but reaching out to the community, with sincerity and commitment can surely do no harm.
All this went down very well, but Mandela's proposal for a truth commssion provoked a huge row. He said it was needed:
Apparently a great debate ensued, some demanded reparations from the whites, others suggested a general amnesty, the common theme in the Afrikaans press, according to Meredith being 'atrocities were committed by both sides, so let us forgive and forget'.
Some of this starts to sound familiar, but perhaps the tragedy is that there was no real local debate on the subject. Instead we had the LLRC Commission foisted on us, created to forestall a UN commission, itself the result of debate overseas.
It is not always possible to arrive at the truth intuitively. A rigourous process of debate can help shape and modify ideas, which by a process of whittling down, sifting and distilling may sometimes result in the truth.
Sometimes the process of thought is as important as the ideas that result.
National reconciliation became his personal crusade. From the moment of his inauguration he strove to establish a new racial accord, constantly reassuring the white minority of their well-being under majority rule and stressing the importance of building a 'rainbow nation'. Addressing a huge crowd on the lawns below Union Buildings in Pretoria on inauguration day, he urged a spirit of forgiveness. 'Wat is verby is verby', he said in Afrikaans. 'What is past is past'.More than anything it is Madela's attitude that is striking and as a leader his example sends an unambiguous message to his people.
Towards his old political adversaries he remained magnanimous. He welcomed F W de Klerk into his cabinet, praising him for his contribution to establishing democracy and commending him as 'one of the greatest sons of Africa'. He was assiduous in cultivating right-wing Afrikaner politicians, determined to avert the the risk of right-wing resistance. He ensured that statues, monuments and street names commemorating events and heroes from Afrikaner history remained untouched. He regularly spoke in Afrikaans, describing it as a 'language of hope and liberation'. When appealing to civil servants to support government reforms, he addressed them in Afrikaans. In changing the name of his official residence in Cape Town from Westbrook, he chose the Afrikaans word, Genadendal, meaning "Valley of Mercy', the name of the first Christian mission in the Cape.
His gestures of goodwill were manifold. He organised what he called 'a reconciliation lunch', bringing together the wives and widows of foremer apartheid leaders and leading black activists. He made a special trip to visit the widow of Hendrik Verwoerd, the architect of apartheid....Even more remarkable was the lunch he arranged for Percy Yutar, the prosecutor in the Rivonia trial who had argued for Mandela to be given the death sentence and expressed regret when this did not happen.
There are plenty of differences between the situation in South Africa and in Sri Lanka, the LTTE were undoubtedly a villainous group of terrorists, with no redeeming qualities whatsoever, but reaching out to the community, with sincerity and commitment can surely do no harm.
All this went down very well, but Mandela's proposal for a truth commssion provoked a huge row. He said it was needed:
..not for the purpose of exacting retribution but to provide some form of public accounting and to help purge the injustices of the past. Unless past crimes were addressed, he said, they would 'live with us like a festering sore'. De Klerk, a deputy president in Mandela's government of national unity, denounced the whole idea, arguing that a truth commission would result in a 'witch-hunt', focusing upon past government abuses while ignoring ANC crimes. It was, he said, likely to 'tear off the stitches of wounds that are beginning to heal'.
Apparently a great debate ensued, some demanded reparations from the whites, others suggested a general amnesty, the common theme in the Afrikaans press, according to Meredith being 'atrocities were committed by both sides, so let us forgive and forget'.
Some of this starts to sound familiar, but perhaps the tragedy is that there was no real local debate on the subject. Instead we had the LLRC Commission foisted on us, created to forestall a UN commission, itself the result of debate overseas.
It is not always possible to arrive at the truth intuitively. A rigourous process of debate can help shape and modify ideas, which by a process of whittling down, sifting and distilling may sometimes result in the truth.
Sometimes the process of thought is as important as the ideas that result.
Wednesday, August 01, 2012
Kath Noble on Chinese projects
Kath Noble has written a piece on Chinese infrastructure projects. While I have no argument with her basic thesis, she repeats, in passing, the common misconception about the World Bank -
It is correct that the World Bank does indeed require conditions, but for the most part these conditions are intended to ensure that the project does provide some benefit for the country in which it is carried out, as this report points out.To quote:
The real reason that politicians prefer Chinese projects is that they come with no questions asked and kick backs all around, both on the Chinese side as well as the local side. The Chinese officials approving the loans probably make as much money as the politician's getting the loans. Unfortunately the general population has to cough up, when the loan needs to be repaid.
Apart from the policy changes required by the World Bank, there is also the tiresome process of monitoring that the Bank insists on. The Banks approach to monitoring is, to quote:
Politicians are thus ever ready to trumpet the benefits of Chinese projects while condemning the World Bank and other lenders. Not that everything that the World Bank has done is a success or that they are right every time, but at least with these projects there is some accountability somewhere. With Chinese projects there is none.
Who decided to build Norochcholai coal plant, minus a pier or some other economical means of getting coal to the station? Not the World Bank, which funded some village hydro projects, apparently with some small success. Nor did they fund the Hambantota habour (minus container terminal) or the Mattala Airport (runway larger than Changi airport, Singapore).
For anyone interested in development, the world has had a good sixty years of experience to learn from since the first new independent states emerged after the second world war. In the 1950's and 1960's there were questions as to what would succeed. By the late 1980's it was clear what needed to be done.
Why is Sri Lanka, in the 21st century, making the same mistakes that many a nation on the African continent made in the 1950's ?
For further reading on this I would recommend Martin Meredith's The State of Africa, there are so many striking parallels, both economic and political with the Sri Lanka of today, it's almost frightening.
"On the plus side, the Chinese don’t try to tell Sri Lanka what to do. This makes a refreshing change from agencies like the World Bank, which refuses to lend unless the Government undertakes major reforms to key policies. Want to build a power plant? Tough luck, because they will only give money to the private sector, and then only if the Government promises to buy the electricity these companies generate at inflated prices for decades to come."
It is correct that the World Bank does indeed require conditions, but for the most part these conditions are intended to ensure that the project does provide some benefit for the country in which it is carried out, as this report points out.To quote:
"From its earliest days through the 1960s, the Bank took a project-by-project approach to development assistance, focusing on capital-intensive infrastructure projects. By the late 1970s, however, it had become clear that the policy and institutional environment in which projects were implemented was a major determinant of the performance of the Bank’s growing project portfolio. Indeed, in many borrowing countries, policy-induced distortions were so severe that projects could not be expected to succeed no matter how well designed they were."The link between governance and growth is something I have talked about before, all the bank is trying to do is to ensure proper policies are in place so that the project works. These policies will help the populace but are irksome to the politicians.
The real reason that politicians prefer Chinese projects is that they come with no questions asked and kick backs all around, both on the Chinese side as well as the local side. The Chinese officials approving the loans probably make as much money as the politician's getting the loans. Unfortunately the general population has to cough up, when the loan needs to be repaid.
Apart from the policy changes required by the World Bank, there is also the tiresome process of monitoring that the Bank insists on. The Banks approach to monitoring is, to quote:
1. Clearly articulated statement of objectives, reflected in the design documents and lending agreements
2. Results framework with output and outcome indicators capable of measuring the results chain leading to achievement of the objectives, specified during project design
3. Regular supervision and supervision reports
4. Self-evaluation by the managing units: Implementation Completion and Results Reports (ICR) completed within six months of project closing
5. Independent validation of the ICRs by the Independent Evaluation Group (ICR Reviews) and independent field evaluations of about one in five projects: Project Performance Assessment Reports (PPARs)
6. Project evaluations also feed into higher level evaluations, including country-level and sector-level evaluations, as well as meta-synthesis evaluations.All of which mean that it is (a) a lot more difficult to come up with a useless white elephant idea, which no one knows about and then (b) to proceed to steal the money which is part and parcel of the whole idea.
Politicians are thus ever ready to trumpet the benefits of Chinese projects while condemning the World Bank and other lenders. Not that everything that the World Bank has done is a success or that they are right every time, but at least with these projects there is some accountability somewhere. With Chinese projects there is none.
Who decided to build Norochcholai coal plant, minus a pier or some other economical means of getting coal to the station? Not the World Bank, which funded some village hydro projects, apparently with some small success. Nor did they fund the Hambantota habour (minus container terminal) or the Mattala Airport (runway larger than Changi airport, Singapore).
For anyone interested in development, the world has had a good sixty years of experience to learn from since the first new independent states emerged after the second world war. In the 1950's and 1960's there were questions as to what would succeed. By the late 1980's it was clear what needed to be done.
Why is Sri Lanka, in the 21st century, making the same mistakes that many a nation on the African continent made in the 1950's ?
For further reading on this I would recommend Martin Meredith's The State of Africa, there are so many striking parallels, both economic and political with the Sri Lanka of today, it's almost frightening.
Sunday, July 22, 2012
Prostituting journalism
This was the editorial of today's Sunday Observer. I thought it interesting enough to be worth sharing.
Apparently, INGO's and Foreign Missions (any guesses as to which ones?) are behind this dastardly plot. Clearly people are annoyed by this but I wonder, why the perpetrators have been termed 'suicide journalists'?
Anyway, it was only last week that the Observer informed us that the alleged crime wave had been blown out of proportion. In that instance it was the open economy that was held to blame, although it does concede, correctly, that the new constitution, was partly to blame.
The faults of that constitution have been extended of late, mostly recently the 18th amendment.
Apparently, INGO's and Foreign Missions (any guesses as to which ones?) are behind this dastardly plot. Clearly people are annoyed by this but I wonder, why the perpetrators have been termed 'suicide journalists'?
Anyway, it was only last week that the Observer informed us that the alleged crime wave had been blown out of proportion. In that instance it was the open economy that was held to blame, although it does concede, correctly, that the new constitution, was partly to blame.
The faults of that constitution have been extended of late, mostly recently the 18th amendment.
Sunday, July 15, 2012
The taming of the Sunday Times
It is often remarked that the local media lacks something in terms of critical analysis. What nonsense!; is the reply, just see the stories in the Sunday Leader on Srilankan Airlines or the Sunday Times lead on the investment in Greek bonds by Sri Lanka's Central Bank.
There is definitely still criticism but it is distinctly more muted than before, nothing illustrates this better than the story on the Central Cinema. The Sunday Times broke the story last week, but tucked it away on page 19 of the paper. Strangely enough, the story was not carried in the online edition. Perhaps it was just an omission.
Further, quite unaccountably, the important follow up: the destruction of the cinema was missed. There was a one line item in the online edition but that was it. was left to the Sunday Leader to carry a follow up.
Why is it that a newspaper that breaks an interesting story, fails to follow up on it. Sloppiness? Inefficiency? It seems hard to believe. In the context of the failure to put the original story on the online edition (where it could be read by potential overseas investors) and the placement of the original story at the back of the newspaper and one gets the distinct impression of 'soft pedalling'.
I have noticed this before (an example here). A few stories make the lead but a lot more are hidden. Most people have little time to spend trawling through the paper looking for tidbits of information and are thus uninformed. There was a time when the Sunday Times would have pursued this with vigour, but those days seem to be in the distant past. It is still, on the whole, one of the better papers, although this is not saying much.
The question is why have they lowered their standards? Are they afraid? Have they bought into the GoSL view? It could be anything although analysts tend to believe the latter rather than the former view. The GoSL liberated the country from ruthless terrorism, give them a little leeway to act.
Unfortunately a lot of people who have bought the hype may not realise that the fundamental requisite for growth is confidence and that confidence in the laws and system of justice is the very foundation of this. Expropriation of property, especially if it is, as the Leader claims, in violation of a court order, strikes at the very heart of confidence.
I am a pessimist, always seeing the glass half full rather than half empty. Perhaps these are minor blips, once these (admittedly) under utilised properties are developed things will start to happen. Perhaps. I tend to think that the most important thing for a state to do is get the governance right and step back and let private investors take over.
I may yet be proved wrong. I certainly hope so.
There is definitely still criticism but it is distinctly more muted than before, nothing illustrates this better than the story on the Central Cinema. The Sunday Times broke the story last week, but tucked it away on page 19 of the paper. Strangely enough, the story was not carried in the online edition. Perhaps it was just an omission.
Further, quite unaccountably, the important follow up: the destruction of the cinema was missed. There was a one line item in the online edition but that was it. was left to the Sunday Leader to carry a follow up.
Why is it that a newspaper that breaks an interesting story, fails to follow up on it. Sloppiness? Inefficiency? It seems hard to believe. In the context of the failure to put the original story on the online edition (where it could be read by potential overseas investors) and the placement of the original story at the back of the newspaper and one gets the distinct impression of 'soft pedalling'.
I have noticed this before (an example here). A few stories make the lead but a lot more are hidden. Most people have little time to spend trawling through the paper looking for tidbits of information and are thus uninformed. There was a time when the Sunday Times would have pursued this with vigour, but those days seem to be in the distant past. It is still, on the whole, one of the better papers, although this is not saying much.
The question is why have they lowered their standards? Are they afraid? Have they bought into the GoSL view? It could be anything although analysts tend to believe the latter rather than the former view. The GoSL liberated the country from ruthless terrorism, give them a little leeway to act.
Unfortunately a lot of people who have bought the hype may not realise that the fundamental requisite for growth is confidence and that confidence in the laws and system of justice is the very foundation of this. Expropriation of property, especially if it is, as the Leader claims, in violation of a court order, strikes at the very heart of confidence.
I am a pessimist, always seeing the glass half full rather than half empty. Perhaps these are minor blips, once these (admittedly) under utilised properties are developed things will start to happen. Perhaps. I tend to think that the most important thing for a state to do is get the governance right and step back and let private investors take over.
I may yet be proved wrong. I certainly hope so.
Friday, July 13, 2012
Central Cinema torn down
Heard that the Central Cinema in Maradana was torn down last night. The Sunday Times website carries a brief news item.
People from around the area say that bulldozers arrived in the middle of the night and started flattening the cinema. The owners apparently tried to contact higher authorities but were unsuccessful in preventing the demolition.
The Sunday Times website says the Urban Development Authority (UDA) demolished the cinema after the owner failed to meet tax obligations. The report in the print edition of last Sunday's paper stated that the owners had apparently won their case in the district court.
People from around the area say that bulldozers arrived in the middle of the night and started flattening the cinema. The owners apparently tried to contact higher authorities but were unsuccessful in preventing the demolition.
The Sunday Times website says the Urban Development Authority (UDA) demolished the cinema after the owner failed to meet tax obligations. The report in the print edition of last Sunday's paper stated that the owners had apparently won their case in the district court.
Sunday, July 08, 2012
UDA takes over the Central Cinema in Maradana
There is a story in the inner pages of today's Sunday Times that the Central Cinema is Maradana has been taken over. Unfortunately the web edition of the paper does not carry the story, but if you do have the paper take a look, its on the top of page 19 and easy to miss if one is not looking for it.
The gist of the report is that after the 8pm show ended on Friday a group of people including police and soldiers drove in and seized the premises. When the owners went to the police to lodge a complaint they were asked to prove their ownership. On presentation of the relevant documents the police said there was little they could do since the UDA,which took over the premises is under the Defence Ministry.
The UDA website however lists the Central cinema property which suggests that the officials were simply executing some older order but I can recall no report of this. I don't think it was a part of the takeover of under utilsed assets.
Can anyone shed any light on this?
For a change, today's papers have a lot of interesting stuff, from the Central Bank investment in Greek bonds, to the killing of a jungle cat, to a couple of issues at Sri Lankan Airlines.
The gist of the report is that after the 8pm show ended on Friday a group of people including police and soldiers drove in and seized the premises. When the owners went to the police to lodge a complaint they were asked to prove their ownership. On presentation of the relevant documents the police said there was little they could do since the UDA,which took over the premises is under the Defence Ministry.
The UDA website however lists the Central cinema property which suggests that the officials were simply executing some older order but I can recall no report of this. I don't think it was a part of the takeover of under utilsed assets.
Can anyone shed any light on this?
For a change, today's papers have a lot of interesting stuff, from the Central Bank investment in Greek bonds, to the killing of a jungle cat, to a couple of issues at Sri Lankan Airlines.
Drugs, violence and trade: the sad tale of the US war on drugs
Indi has written something on the US war on drugs. There is a sad and twisted tale behind this and its roots lie in, of all things, a failed trade policy.
The tale starts with protectionism for the US sugar industry. This started as far back as 1934 but was tightened in the 1970's. Under pressure from the sugar industry import quotas were tightened. Sugar imports from the Caribbean dropped from around 6m tonnes in 1977 to around 1.2m tonnes by 1998, impoverishing many small nations. Therefore it is hardly surprising that farmers there found coca a more attractive crop and the underground American drug industry a more willing trading partner.
Sugar protectionism costs American consumers billions while providing the narcotics industry with its primary produce.
A second strand in this tale is the horrific violence that the Mexican drug cartels, enriched by the lucrative trade with the US have unleashed. Unfortunately, one of the lesser known facts is that the Mexican cartels buy their weapons, quite legally, from across the border.
Not only does the US create the lucrative market (the emphasis on cutting supply, rather than demand keeps drugs prices high, enriching traffickers), force farmers south of the border to turn to illegitimate crops, they also arm the gangs. Some have expressed fears that the drugs violence in Mexico can spill over into the US, but it is rotten US policy that is igniting the region.
Cutting the Gordian Knot of problems is well nigh impossible, but legalising distribution and consumption will help. Abolishing the protectionism that impoverishes the Caribbean and hurts American consumers and industry will also help, but there is another twisted evil, that bars reform: campaign finance by special interest groups. The NRA prevents a sensible gun policy and the sugar industry perverts trade policy but unless campaign finance is reformed so that these minority groups can no longer pull the strings of policy nothing is possible.
My simple suggestion is that private funding be abolished entirely, the state can give each candidate a small fixed sum and no further spending or funding (including "gifts" of free airtime) is permitted. Politicians can then concentrate on policy, instead of fund raising and end up having to spend the entire of their tenure serving the special interests of their donors.
Source: I picked up the information on the impact of US sugar protectionism on Caribbean farmers from Todd Buchholz's book.
The tale starts with protectionism for the US sugar industry. This started as far back as 1934 but was tightened in the 1970's. Under pressure from the sugar industry import quotas were tightened. Sugar imports from the Caribbean dropped from around 6m tonnes in 1977 to around 1.2m tonnes by 1998, impoverishing many small nations. Therefore it is hardly surprising that farmers there found coca a more attractive crop and the underground American drug industry a more willing trading partner.
Sugar protectionism costs American consumers billions while providing the narcotics industry with its primary produce.
A second strand in this tale is the horrific violence that the Mexican drug cartels, enriched by the lucrative trade with the US have unleashed. Unfortunately, one of the lesser known facts is that the Mexican cartels buy their weapons, quite legally, from across the border.
Not only does the US create the lucrative market (the emphasis on cutting supply, rather than demand keeps drugs prices high, enriching traffickers), force farmers south of the border to turn to illegitimate crops, they also arm the gangs. Some have expressed fears that the drugs violence in Mexico can spill over into the US, but it is rotten US policy that is igniting the region.
Cutting the Gordian Knot of problems is well nigh impossible, but legalising distribution and consumption will help. Abolishing the protectionism that impoverishes the Caribbean and hurts American consumers and industry will also help, but there is another twisted evil, that bars reform: campaign finance by special interest groups. The NRA prevents a sensible gun policy and the sugar industry perverts trade policy but unless campaign finance is reformed so that these minority groups can no longer pull the strings of policy nothing is possible.
My simple suggestion is that private funding be abolished entirely, the state can give each candidate a small fixed sum and no further spending or funding (including "gifts" of free airtime) is permitted. Politicians can then concentrate on policy, instead of fund raising and end up having to spend the entire of their tenure serving the special interests of their donors.
Source: I picked up the information on the impact of US sugar protectionism on Caribbean farmers from Todd Buchholz's book.
Saturday, July 07, 2012
Rod Stewart builds model railways
Thursday, July 05, 2012
Belief in astrology leaves nation in the dark
Well, not yet, but soon. Very soon.
The stars foretell it.
In the boundless wisdom of the rulers, the clocks were set back by half an hour, at the auspicious time of 06.42am on the 15th of April 2006.
Now we reap the benefit, the darkness will engulf us soon.
The stars foretell it.
In the boundless wisdom of the rulers, the clocks were set back by half an hour, at the auspicious time of 06.42am on the 15th of April 2006.
Now we reap the benefit, the darkness will engulf us soon.
Wednesday, June 27, 2012
Why does S&P classify the Sri Lankan banking sector as 'high risk'
The ratings agency Standard & Poor's has issued a report that says the Sri Lankan banking sector faces high economic, credit and regulatory risks. The Central Bank was quick to issue a rebuttal but what is the report all about and should it concern the public?
Finance companies are vulnerable due to high concentration of loans to certain asset classes (eg pawning, land and vehicles) and rapid growth in
credit in an environment of rising
interest rates. Exposure to share market is also problematic since share prices
have been falling.
How is this relevant to the public?
It is a broad macro level report. For the public in general the main issue is where they should invest their money. Remember Ceylinco? Could it happen again?
In my opinion there are several finance companies that look distinctly shaky, so be careful where you invest your money. Only invest in the ones that are listed by the Central Bank. Even amongst the regulated ones, some are better than others, so read the rating report (all are supposed to be rated) and go for the ones that have higher (A or BB) ratings. There is no point trying to get higher interest rates if one risks losing the capital invested.
For investors and businessmen it is a message that governance matters. Many have been pooh poohing the impact of corruption and have not noticed a deterioration in the rule of law. If the systems don't work, one cannot rely on the law to protect ones investment. If you get into difficulties there is little hope unless one has influential friends. Some have discovered this the hard way.
Liberal economics and governance tend to go hand in hand with liberal politics. When one is lacking, it tends to show up in one of the others.
For those interested, the methodology behind the S&P assessment is detailed here.
The report details the risks the SL banking industry
faces in comparison with that of the banking sector in other countries. It is
important to note that the major issues
stem from the institutional framework and regulatory conflicts. It does not look at individual institutions but looks at risks the sector as whole faces.
The problems identified have to do with bank regulators
(Central Bank) , the system of justice and broad macro economic policy. These will impact on the sector
as a whole, although some banks will be more affected than others, depending on
specific circumstances, such as the quality of their loans and internal control systems.
The issues highlighted will have long term detrimental
impact, my guess is probably over a 2-5 year horizon. This gives time for
corrective action, if regulators are interested. There has been no sudden
deterioration in the banking system, the issues highlighted have been building
up over the past 5 years.
The report, is in my opinion, of relevance for long term investors,
particularly foreign investors. For local investors/companies, in my
opinion, there is not much that can be done
except that investment horizons should be shortened (look for 2-3 year
paybacks) and minimise dealings with more vulnerable entities.
Pertinent comments in the report are:
"Nevertheless, in our view, Sri Lanka's economic
imbalances could increase if credit growth continues at the current pace."
Banking sector credit is still growing quite fast, the
main drivers being construction projects by the Government as well as private
sector projects. This will keep the rupee under pressure and may push inflation
and the budget deficit.
"relaxed lending practices and underwriting
standards, as well as a weak payment culture and rule of law."
The relaxed lending practices is a relative term, it is
not clear if this relates more to state banks or private sector banks. Credit
evaluation is not standardised and the level of credit information is low, so
evaluation, especially of personal loans cannot be as sophisticated as that in
developed markets.
The rule of law is a concern due to the inefficiency of
the court system and the increased susceptibility to corruption and influence
which means enforcing contracts, mortgages etc is difficult, time consuming and
expensive. The GoSL repudiation on the oil hedging contract is an example of an
issue that has raised this red flag amongst rating firms, banks and investors.
"We view the banking regulations in Sri Lanka as
somewhat weaker than international standards. Governance and transparency of
banks are weak by global standards."
"The key regulations for banks seem sufficient.
However, finance companies are less regulated, in our view. This is despite the
December 2008 collapse of a finance company triggering a run on a bank in that
group."
"Moreover, we see a potential conflict of interest
in the central bank's role. In addition to policy formulation and supervision
of banks, the monetary board of the central bank also oversees Employees'
Provident Fund investments. The fund is a large investor in Sri Lankan banking
stocks."
Largely self explanatory, comments refer mostly to
certain state banks and the recent interference in private banks, eg through
the removal and appointment of directors, the EPF/ETF/SLIC using their
shareholdings to remove experienced bankers and nominate unqualified state
nominees.
How is this relevant to the public?
It is a broad macro level report. For the public in general the main issue is where they should invest their money. Remember Ceylinco? Could it happen again?
In my opinion there are several finance companies that look distinctly shaky, so be careful where you invest your money. Only invest in the ones that are listed by the Central Bank. Even amongst the regulated ones, some are better than others, so read the rating report (all are supposed to be rated) and go for the ones that have higher (A or BB) ratings. There is no point trying to get higher interest rates if one risks losing the capital invested.
For investors and businessmen it is a message that governance matters. Many have been pooh poohing the impact of corruption and have not noticed a deterioration in the rule of law. If the systems don't work, one cannot rely on the law to protect ones investment. If you get into difficulties there is little hope unless one has influential friends. Some have discovered this the hard way.
Liberal economics and governance tend to go hand in hand with liberal politics. When one is lacking, it tends to show up in one of the others.
For those interested, the methodology behind the S&P assessment is detailed here.
Saturday, June 16, 2012
The Show Must Go On
Thus sang Freddy Mercury, seriously ill and close to the end of his life, in 1990.
On the sunny island it seems that it is the Games that must go on. Sri Lanka may have lost the bid to host the Commonwealth Games, but they will host the Asian Youth Games in 2017 at a cost of US$300m.
The leadership cannot be faulted for lack of tenacity. Never mind that this admirable trait should probably be directed towards the many pressing problems that plague the country instead of sports. This is the familiar cry of the critics but what harm in one event, just one, that will put us on the map?
In July last year, Sri Lanka was supposed to host an IPL style Premier League but that flopped, ostensibly due to the lack of participation by Indian cricketers, but more probably because it was being organised without consultation with the relevant cricket boards. Cricket is a well organised sport and it is necessary to work through the proper channels and protocols if something is to happen. One cannot dream up something and then expect the rest of the world to go through various contortions to conform to our pressing needs. We expect it, but it does not always happen.
Happily, the team names were transferred to rugby and this year we witnessed the Carlton Super 7's, complete with Bollywood stars, just like the IPL. No sense in wasting a good idea, eh?
Rugby however, is small beer compared to cricket, so the putative Premier League is back, for a second innings, so to speak.
Like the Premier League, it seems that the Olympic dream still burns bright and true, hence the Youth Games; surely only a stepping stone to greater things.
In between the various bids for sporting attractions, Colombo also played host to a night race tied to a music festival.
The only thing unusual about the night race was the host city: the capital Colombo. Most of the others are either centred on, or feature Hambantota. This will shortly be rectified however, for a race track is planned for Hambantota.
All in all, it seems that we need not one, but many events, all of which will put us on the map. It's a new trend in marketing, putting cities on the world map but what is the underlying driver of it all? It is surely the one thing that makes the world go round: Love.
The ruler's love for their hometown and country is undisputed and second to none. Pure and unconditional, it determines all policy. Who can fault love? Actions in its name must surely be good and as Freddy said, don't stop me now.
Queen has such great music. Artistry of a high order and so profound. Perhaps we should also remember that he warned that, too much love can kill, just as none at all. Perhaps we should make it our anthem.
On the sunny island it seems that it is the Games that must go on. Sri Lanka may have lost the bid to host the Commonwealth Games, but they will host the Asian Youth Games in 2017 at a cost of US$300m.
The leadership cannot be faulted for lack of tenacity. Never mind that this admirable trait should probably be directed towards the many pressing problems that plague the country instead of sports. This is the familiar cry of the critics but what harm in one event, just one, that will put us on the map?
In July last year, Sri Lanka was supposed to host an IPL style Premier League but that flopped, ostensibly due to the lack of participation by Indian cricketers, but more probably because it was being organised without consultation with the relevant cricket boards. Cricket is a well organised sport and it is necessary to work through the proper channels and protocols if something is to happen. One cannot dream up something and then expect the rest of the world to go through various contortions to conform to our pressing needs. We expect it, but it does not always happen.
Happily, the team names were transferred to rugby and this year we witnessed the Carlton Super 7's, complete with Bollywood stars, just like the IPL. No sense in wasting a good idea, eh?
Rugby however, is small beer compared to cricket, so the putative Premier League is back, for a second innings, so to speak.
Like the Premier League, it seems that the Olympic dream still burns bright and true, hence the Youth Games; surely only a stepping stone to greater things.
In between the various bids for sporting attractions, Colombo also played host to a night race tied to a music festival.
The only thing unusual about the night race was the host city: the capital Colombo. Most of the others are either centred on, or feature Hambantota. This will shortly be rectified however, for a race track is planned for Hambantota.
All in all, it seems that we need not one, but many events, all of which will put us on the map. It's a new trend in marketing, putting cities on the world map but what is the underlying driver of it all? It is surely the one thing that makes the world go round: Love.
The ruler's love for their hometown and country is undisputed and second to none. Pure and unconditional, it determines all policy. Who can fault love? Actions in its name must surely be good and as Freddy said, don't stop me now.
Queen has such great music. Artistry of a high order and so profound. Perhaps we should also remember that he warned that, too much love can kill, just as none at all. Perhaps we should make it our anthem.
...Too much love will kill you-Queen-
If you can't make up your mind
Torn between the lover
And the love you leave behind
You're headed for disaster
'cos you never read the signs
Too much love will kill you
Every time...
Wednesday, June 13, 2012
School children attacked by university students-for speaking English
The Daily News carried a story that a group of 'international '(ie English language) school students from Panadura were attacked by a group of university students. The reason for the attack was apparently that the 'international' school students spoke English. The students had entered the university to participate in a tree planting campaign.
English is seen by some sections of society as a barrier, it is colloquially referred to as 'Kaduwa' or 'kadda' for short. Kaduwa is the Sinhalese term for sword and it is used in the sense that it is the instrument that cuts people off from advancing. It suggests that there is, rightly or wrongly, resentment against the English language.
Perhaps it is the lack of opportunities and the perception that English helps people to get jobs. Its probably correct, this is what is driving the demand for English language education. The lack of opportunities is what is also driving people into jobs overseas.
The university students probably thought the school children were being uppity and decided to teach them a lesson, but their action shows just how debased and perverted a nation that we live in.
There is never a shortage of people who jump up to claim that we are heirs to an ancient civilisation, that we are, oh so much superior to the hypocritical and materialistic West, but does this act of violence spark even a murmur of dissent? It barely made the news. Is this what we have descended to, to accept as normal behaviour?
English is seen by some sections of society as a barrier, it is colloquially referred to as 'Kaduwa' or 'kadda' for short. Kaduwa is the Sinhalese term for sword and it is used in the sense that it is the instrument that cuts people off from advancing. It suggests that there is, rightly or wrongly, resentment against the English language.
Perhaps it is the lack of opportunities and the perception that English helps people to get jobs. Its probably correct, this is what is driving the demand for English language education. The lack of opportunities is what is also driving people into jobs overseas.
The university students probably thought the school children were being uppity and decided to teach them a lesson, but their action shows just how debased and perverted a nation that we live in.
There is never a shortage of people who jump up to claim that we are heirs to an ancient civilisation, that we are, oh so much superior to the hypocritical and materialistic West, but does this act of violence spark even a murmur of dissent? It barely made the news. Is this what we have descended to, to accept as normal behaviour?
Sunday, June 10, 2012
People tighten their belts but pressure on rupee continues
There is a report in today's Sunday Times that local bakery owners have noticed a decline in sales following increases in the price of bread.
I happened to have a chat with a banker on Friday and he said much the same thing. Based on volumes of imports channelled through this particular bank he said that they had noticed about a 15% decline in wheat imports, a 20%-25% decline in milk powder imports and perhaps a further 10%-15% in other supermarket food and FMCG items.
People are indeed tightening their belts therefore the pressure on the currency should ease. This has not because of Government expenditure and construction projects.
The US$500m raised by the Bank of Ceylon was borrowed by the Government and used to settle creditors, possibly including some petroleum bills. No one has a clear idea of what it was used for but bankers seem to think that the money was spent within a couple of weeks.
The infrastructure projects including the Mattala Airport and Hambantota port as well as private sector construction projects contribute to the growth in imports which rose 17% in the quarter to March 2012.
The problem with construction projects is that once started they are difficult to stop.
Infrastructure and construction are not bad things in themselves. They contribute positively to the calculation of the GDP number, which is, in simple terms, a measure of output. They can also create a lot of genuine activity in the local economy, depending on the amount of local content in the project.
The problem is that with the Chinese projects, local content is small, so the process of construction provides minimal boost to the local economy, despite the fact that they do in fact flatter the GDP calculation. Materials, equipment and even labour comes from China.
This is partly why the country reports high GDP growth number while many people fail to see an improvement in their standard of living. Money comes in and goes out, barely touching the local economy. If local labour, local contractors or local suppliers were used, jobs would be created and local businesses would benefit.
The bigger issue is the viability of the projects themselves. A Chinese funded and built project is still good, provided it serves the purpose and most importantly generates an adequate return that covers the cost of finance. The project needs to be able to service the debt used to build it at a minimum. If it fails to do so, then there is a big problem, as the Spanish are now slowly waking up to.
The morning after a particularly hard party can be painful.
A little more on the positive side of labour in Chinese projects is here. There is a good debate in the comments section.
I happened to have a chat with a banker on Friday and he said much the same thing. Based on volumes of imports channelled through this particular bank he said that they had noticed about a 15% decline in wheat imports, a 20%-25% decline in milk powder imports and perhaps a further 10%-15% in other supermarket food and FMCG items.
People are indeed tightening their belts therefore the pressure on the currency should ease. This has not because of Government expenditure and construction projects.
The US$500m raised by the Bank of Ceylon was borrowed by the Government and used to settle creditors, possibly including some petroleum bills. No one has a clear idea of what it was used for but bankers seem to think that the money was spent within a couple of weeks.
The infrastructure projects including the Mattala Airport and Hambantota port as well as private sector construction projects contribute to the growth in imports which rose 17% in the quarter to March 2012.
The problem with construction projects is that once started they are difficult to stop.
Infrastructure and construction are not bad things in themselves. They contribute positively to the calculation of the GDP number, which is, in simple terms, a measure of output. They can also create a lot of genuine activity in the local economy, depending on the amount of local content in the project.
The problem is that with the Chinese projects, local content is small, so the process of construction provides minimal boost to the local economy, despite the fact that they do in fact flatter the GDP calculation. Materials, equipment and even labour comes from China.
This is partly why the country reports high GDP growth number while many people fail to see an improvement in their standard of living. Money comes in and goes out, barely touching the local economy. If local labour, local contractors or local suppliers were used, jobs would be created and local businesses would benefit.
The bigger issue is the viability of the projects themselves. A Chinese funded and built project is still good, provided it serves the purpose and most importantly generates an adequate return that covers the cost of finance. The project needs to be able to service the debt used to build it at a minimum. If it fails to do so, then there is a big problem, as the Spanish are now slowly waking up to.
The morning after a particularly hard party can be painful.
A little more on the positive side of labour in Chinese projects is here. There is a good debate in the comments section.
Monday, June 04, 2012
Colombo to Haputale by Rail
There is something special about train
travel. Perhaps it is the fact that the passengers are seated high
above other traffic, perhaps because trains have priority over road
users, possibly the immense power of the engine itself or the
graceful shape of the train as it wends its way across the horizon.
It is hard to pin down but when riding the train many will feel it.
I had read about the train journey in
the observation carriage from Colombo to Badulla, all the travel
guides advise visitors to do it. I finally got around to it a couple of months ago
and it was well worth the effort.
Prospective travelers have three
options; first-class observation car (Rs.750, one way), the
air-conditioned Expo carriage (Rs.3,950, return) or the ordinary
second-class compartment.
The observation carriage needs to be
booked 14 days (not 10 days as advised by some websites) in advance
of the journey. Tickets sell out fast so one needs to be there at
opening time on the prescribed day. When I tried to book it 10 days
ahead it was sold out so we had to take the Expo carriage. Booking
the Expo carriage is convenient, it can be booked online or at a
travel agent and at anytime. Second class travel is an option for the
adventurous and should be fine, provided the journey is kept short,
of which, more details below.
I think I was fourteen when I last went
on a train, which was a long time ago. Walking into the Fort Railway
station, things seem to be worse than I remember: overcrowded trains
and a dirty, smelly station. I had opted to go from Colombo to
Haputale, a journey of eight hours according to the time-table,
looking at the crowded second-class carriages I was glad that we had
decided to take the Expo carriage.
The Expo carriage is painted nicely but
looks a lot better on the website than in real life. It has clean,
airline type seats and is staffed by two helpful stewards who will
offer breakfast, lunch, and tea. There is free bottled water, a
decent lavatory and air-conditioning. The air-conditioning is not
really necessary when travelling in the hills but it is welcome when
on the plains. Unfortunately the windows are sealed shut, so it’s
not possible to open them to feel the cool upcountry breezes. The
windows were not very clean, there were black streaks that seemed to
be some kind of waste from the engine but luckily they were not dirty
enough to spoil the view.
Although clean, the seats are not very
roomy and the overhead compartment is not very big so it is best to
travel light. Some of the lids on the overhead lockers don’t have
good springs so they have a tendency to close while one is taking
things out or putting things in.
The food is like airline food, nothing
great but edible. For me food is an important component of any trip
and having read reviews which said the food was bad, I took my own
sandwiches. The Keells at Crescat has some good whole wheat bread and
some nice hams, cheese and other meats that can make a good sandwich.
The bread had just come out of the oven when I went at 11am. Being
particular about my tea I took a flask of strong home-brewed tea with
me, the Expo staff were happy to supply me with cups, milk and sugar.
The train set off on time from the Fort
station at 5.55am. The lights in the carriage were a little bright so
it was difficult to see out of the windows at first, but as soon as
it became light we could see the suburbs slowly waking up beneath us.
Life in rural areas tends to cluster
around the road. Shops, houses and businesses congregate thickly near
the road and thin out as one moves inwards on the lanes and by lanes
that spread out from the main road. When one is on the road, one is a
part of the activity on the road. The railway however, is away from
the road. It travels on a higher elevation, parallel to or across
the road. With its increased elevation, passengers on the train find
themselves looking down, like distant observers, while daily life
unfolds below them. It’s fascinating, almost voyeuristic at times.
Children going to school, people walking to the shops, talking in the
street, sweeping their doorsteps, watering their plants, digging
their gardens, the suburban townscape can be very interesting.
(Click on the pictures for the high resolution image)
(Click on the pictures for the high resolution image)
As the train starts move away from the
suburbs the scenery changes. My childhood memories of the first part
of the journey to Kandy were of paddy fields with farmers working the
fields with buffaloes. There were far fewer fields and no buffaloes
but the scenery was still pleasant and once the train starts to climb
there are good views of the hills, especially past Kadugannawa.
From Peradeniya onwards the climb gets
steeper and the views, progressively better. Once past Hatton the
views are superb and past Nanu Oya, especially when approaching
Ohiya, quite spectacular.
The approach to Ohiya skirts the Horton
Plains reserve and the colours of the natural forest and vegetation
are stunning: trees in deep greens, reds and orange, the grass in
light green and yellow. Bella Sidney Woolf, in her book How to
see Ceylon bemoaned the encroachment of tea estates on the
natural vegetation. I never understood what she meant, until now. The
tea estates have a beautiful green that looks very pretty but the
glory and variety of the forest puts the cultivated estates in the
shade.
The only problem with doing the whole
journey is the time taken. Moreover the train tends to run late so
the journey gets even longer: Colombo to Haputale was scheduled to be
eight hours but we were an hour and a half late when we arrived at
Haputale. On the way back we were 45 minutes late. According to
people in Haputale the train is usually an hour or two late.
Haputale Station
Haputale Station, with the mist rolling down at about 10.45am
The beauty of the scenery means that
the journey is a must-do, but for best effect I would suggest that it
be done in stages. Since the best of the scenery is towards the end,
travelers could do Hatton-Haputale or Nanu Oya-Badulla. For someone
with a large budget it is possible to take the seaplane to the
Castlereagh reservoir, which is a couple of kilometres from the
Hatton town and then take the train from Hatton. Someone intending to
do the journey from Nanu Oya could take the seaplane to Nuwara Eliya
and then take a taxi to Nanu Oya. Alternatively, people can drive to
either Hatton or Nanu Oya and take the train from there. On a shorter
journey (three to four hours) a less comfortable carriage would not
matter so much, so either the Observation carriage for even
second-class should be fine with the added advantage that the windows
can be opened, so it is possible to enjoy the fresh, clean air.
The Colombo-Peredeniya leg, not to be
sneered at, could be done separately. The next time you need to go to
Kandy, just take the train and enjoy the scenery.
Tips on the Expo Carriage
Not all seats on the Expo carriage have
equally good views. Fortunately, provided the train is not crowded
the stewards do allow one to switch seats. The best views are mostly
on the right hand side of the carriage, so pick a seat on the right
but keep a sharp lookout for good scenery on the left.
Rows 4,6,and 9 are good.
Row 7 is about medium.
Row 1 has smaller window, a messy tray
table and limited legroom.
The worst seats are rows 3 and 5, only
half a window to look through.
Exporail Website
General Tips
Take some sandwiches and water,
especially if travelling on the observation carriage or 2nd
class.
Do the journey in short legs.
Take a book to read while waiting for
the train, it may be late
Journey’s of three to four hours are:
Peredeniya Junction to Hatton
Hatton to Nanu Oya
Nanu – Oya to Haputale or Ella.
Haputale to Badulla
For timetables and further info, have a look here.
Sunday, June 03, 2012
Why is Colpetty crawling with security?
Residents of Colpetty have noticed a sudden increase in the security presence in the area. There are sentries and checkpoints everywhere and frequent patrols. There are even a few mobile units on motorcycles cruising around.
Security is especially tight in the areas behind Temple Trees, in the lanes adjoining St Michael's church. Driving back tonight I noticed it myself.
Observant residents claim that the increased security presence coincided with the release of Sarath Fonseka. Hmm... Wonder what it means?
Security is especially tight in the areas behind Temple Trees, in the lanes adjoining St Michael's church. Driving back tonight I noticed it myself.
Observant residents claim that the increased security presence coincided with the release of Sarath Fonseka. Hmm... Wonder what it means?
Political dynasties: a response
Changing Perspectives has written something on political dynasties.
This is my response:
There was a 'ruling class' that used to dominate parliament, the judiciary, the civil service, the church, industry and other institutions in the UK. This was not a family but a section of society- a class. In Britain, the influence of that class has declined steadily since 1945 and for the most part has broken down completely. Jeremy Paxman documents their involvement in his book published in 1991, but it has declined significantly even since then.
In Sri Lanka there existed something roughly akin to that at the end of British rule in 1948. These were people who had been to St Thomas', Royal, Trinity and the other 'big' schools, or been to Oxbridge. It persisted in some way until the 1970's but although Bandaranaike and Jayewardene were from that class, much of the rest of the government, the public service and others were not.
With the advent of the change in language in 1956, the riots of 1958, and the abolishing of the Civil Service in the 1960's, many Civil Servants, judges and police officers simply migrated, retired or resigned, therefore the governments of the day was not dominated by that class. The sudden departure of vast numbers of educated people wrought havoc and traditions of independence and integrity were lost. New entrants to the services could not absorb all of the practices and knowledge of the departing seniors within a short period of time. In any case many of of the new comers were political appointees and as such were interested more in serving their political masters rather than the public at large.
The dynasties of old no longer exist. In fact, in a proper functioning democracy the dynasty or even the person in a position has little relevance. It is the institution that matters.
A quick primer on the UK and the importance of institutions. The Royal family in England is a constitutional monarchy and only have only a symbolic role to play. Originally the monarchy was very powerful, and its subjects treated badly.
Over the course of an 800 year struggle, starting with the Magna Carta the people rebelled and seized power from the monarchy, ultimately reducing them to mere symbols. Initially it was the barons who rebelled and imposed the Magna Carta on the king. After many battles with the crown over several centuries came The Bill of Rights of 1689. This was the foundation of the modern parliament
All of these were aimed at only one thing: limiting the power of the king.
Having won their freedom, they guard it jealously. Freedom is guaranteed by institutions: an independent judiciary, an independent civil service and police, parliament and a free press which keeps people informed of what is going on. If the judiciary is independent, they can strike down unjust laws, if parliament happens to pass any such laws. The Civil Service and police will not enforce such laws, this is how the power of the rulers is checked.
The Civil Service runs the actual administration of the country. They must be impartial and serve everyone equally. Their independence is guaranteed by Permanent Secretaries (senior civil servants who cannot be removed), the Public Services Commission, which alone can determine the promotion, transfer and salaries of Civil Servants. Politicians should not interfere in this process.
It is important that the civil service and police be independent of the rulers so that they do not become tools to distribute political largesse or of repression.
Similar structures ensure the independence of the judiciary and the police.
England has no written constitution but in most modern democracies the power of the rulers is limited by the constitution as well as the institutions listed above. The idea of the institution is important because no one wants to be ruled by the whims and fancies of an individual. People must be ruled by laws, not by men.
These checks and balances existed at one time in Sri Lanka but in the years since independence have been removed through constitutional change, abolishing the independent civil service and through corruption. The result is that the rulers are now all-powerful, which is detrimental to the rights and liberty of its citizens.
There are vast celebrations held at public expense to celebrate independence from Britain but the rights of Sri Lanka's citizens have been eroded greatly since 1948.
This is my response:
There was a 'ruling class' that used to dominate parliament, the judiciary, the civil service, the church, industry and other institutions in the UK. This was not a family but a section of society- a class. In Britain, the influence of that class has declined steadily since 1945 and for the most part has broken down completely. Jeremy Paxman documents their involvement in his book published in 1991, but it has declined significantly even since then.
In Sri Lanka there existed something roughly akin to that at the end of British rule in 1948. These were people who had been to St Thomas', Royal, Trinity and the other 'big' schools, or been to Oxbridge. It persisted in some way until the 1970's but although Bandaranaike and Jayewardene were from that class, much of the rest of the government, the public service and others were not.
With the advent of the change in language in 1956, the riots of 1958, and the abolishing of the Civil Service in the 1960's, many Civil Servants, judges and police officers simply migrated, retired or resigned, therefore the governments of the day was not dominated by that class. The sudden departure of vast numbers of educated people wrought havoc and traditions of independence and integrity were lost. New entrants to the services could not absorb all of the practices and knowledge of the departing seniors within a short period of time. In any case many of of the new comers were political appointees and as such were interested more in serving their political masters rather than the public at large.
The dynasties of old no longer exist. In fact, in a proper functioning democracy the dynasty or even the person in a position has little relevance. It is the institution that matters.
A quick primer on the UK and the importance of institutions. The Royal family in England is a constitutional monarchy and only have only a symbolic role to play. Originally the monarchy was very powerful, and its subjects treated badly.
Over the course of an 800 year struggle, starting with the Magna Carta the people rebelled and seized power from the monarchy, ultimately reducing them to mere symbols. Initially it was the barons who rebelled and imposed the Magna Carta on the king. After many battles with the crown over several centuries came The Bill of Rights of 1689. This was the foundation of the modern parliament
All of these were aimed at only one thing: limiting the power of the king.
Having won their freedom, they guard it jealously. Freedom is guaranteed by institutions: an independent judiciary, an independent civil service and police, parliament and a free press which keeps people informed of what is going on. If the judiciary is independent, they can strike down unjust laws, if parliament happens to pass any such laws. The Civil Service and police will not enforce such laws, this is how the power of the rulers is checked.
The Civil Service runs the actual administration of the country. They must be impartial and serve everyone equally. Their independence is guaranteed by Permanent Secretaries (senior civil servants who cannot be removed), the Public Services Commission, which alone can determine the promotion, transfer and salaries of Civil Servants. Politicians should not interfere in this process.
It is important that the civil service and police be independent of the rulers so that they do not become tools to distribute political largesse or of repression.
Similar structures ensure the independence of the judiciary and the police.
England has no written constitution but in most modern democracies the power of the rulers is limited by the constitution as well as the institutions listed above. The idea of the institution is important because no one wants to be ruled by the whims and fancies of an individual. People must be ruled by laws, not by men.
These checks and balances existed at one time in Sri Lanka but in the years since independence have been removed through constitutional change, abolishing the independent civil service and through corruption. The result is that the rulers are now all-powerful, which is detrimental to the rights and liberty of its citizens.
There are vast celebrations held at public expense to celebrate independence from Britain but the rights of Sri Lanka's citizens have been eroded greatly since 1948.
Friday, June 01, 2012
Is it all Greek to you? A simplified guide to the state of public finances
This is something that I wrote in May 2010 for an internal newsletter. There was an election coming around the corner and I felt that people should understand some of the fundamental problems that a Government should address. It is now more relevant than ever, especially since the problems are now apparent. I have been meaning to update the figures but have been too busy at work.
The Government continues to spend merrily, but the budget deficit is a lot better than it was in 2009, the reason being that taxation has increased, so that Government revenue has increased. Are citizens getting good value, in terms of services, for the vast sums expended? It is up to each individual to decide this question, but ask yourself if:
a) Would you send your children to free state schools and universities, if you had the means to send them to private universities here and abroad?
b) When was the last time you used the free health services provided in state hospitals? How satisfied were you?
c) Would you turn to the courts and law enforcement authorities, confident that you would receive justice if you had a dispute with the CEB, the CPC, a bank, your landlord or a debtor? Where do you turn to, if you have a dispute with a minister, over a simple matter of property?
The press has highlighted a financial crisis that is taking place in Greece. In a nutshell, what happened was that the Greek government had borrowed too much money and seemed unable to repay. Investors who had lent money to Greece (by buying Greek treasury bills, bonds etc) panicked and it seemed that the Greek government would have difficulty in raising money. This would have meant that Greece, which needed to borrow money to pay expenses would not have been able to pay its workers or run its public services.It has not yet come to this because the European Central Bank and other European Governments look likely to work out a package to save Greece.The Government of Sri Lanka has published a pre-election budgetary position report on the 2nd of March 2010, which shows a weakening position.The figures for Sri Lanka (in summary) are as follows(The figures published are provisional. Chart from LBO).Government revenue in 2009 is Rs.702bn (please refer column 4 headed “2009prov”) but expenditure is 884bn. The Government is spending Rs.182bn more than it earns – something that should be impossible, but happens anyway.Anyone earning a fixed salary will wonder how it is possible to spend more than one earns. The answer is simple: by borrowing money. Of course, this means that while we can spend and enjoy today, we must repay tomorrow – with interest added to the bill.As everyone knows, the Government’s revenue is made up mostly of taxes; VAT, income tax, Nation Building Tax, import duties etc but what does the Government do with all this money that we end up with a deficit?The main items of expenditure in 2009 (in order of importance) are:Interest Rs.308bnSalaries & pensions Rs.268bnSubsidies Rs.194bnOther goods/services Rs.113bn.Note that the single largest item of expense is interest. That is because the Government has for many years been running a deficit and borrowing to meet the difference so the interest cost has risen every year, until it is now the largest single item of expense. Given that the revenue deficit is RS.182bn and interest payments are Rs.308bn, the country is, in effect, taking new loans in order to pay the interest on the old loans.Why is it that we have a deficit when taxes go up every year? (Government tax revenue rose from Rs.509bn in 2007 to Rs.585bn in 2008 to Rs.619bn in 2009). The problem is the expenses have been rising faster than taxes. The increases in expenses between 2008 and 2009 are shown below:Interest costs rose by Rs.95.8bnSalaries/pensions rose by Rs.29bnSubsidies rose by Rs.24bnOther goods/services declined by (Rs.7bn)The fastest increase in spending is on interest. There are two reasons for this. One is that the amount of debt has increased. The other is that the rate of interest paid on the loans has also gone up, partly because of tighter monetary control and partly because the country is now borrowing mostly in the open market rather than obtaining concessionary loans from donor agencies like the World Bank.There is obviously a limit to which anyone can borrow and spend, so either income (in the form of taxes) needs to rise or expenditure needs to be cut for finances to reach a sustainable state.Controlling the deficit early is essential: every time the government borrows to spend, the deficit has the potential to expand because of the added interest cost. If the cycle of ‘borrow and spend’ is continued things can go out of control very quickly.This is why the deficit is important and why the IMF has set certain targets for the deficit. This is what got Greece into trouble.Sri Lanka’s overall budget deficit is 10.3% of GDP. Last year Greece’s budget deficit reached 12.7% of GDP. Greece’s total debt as a % of GDP reached 94.6% of GDP. Sri Lanka’s total debt was around 82.9% of GDP. Things are a little too close for comfort when compared to Greece.In the middle of last year the IMF warned that Sri Lanka’s debt, which has almost doubled from the year 2000, was in a very unhealthy state. Not only has the debt grown, its composition has changed. There has been a shift from lower cost external concessional borrowing to higher cost domestic and nonconcessional external borrowing. In addition to increasing the cost of the portfolio, the non-concessional borrowings have been of shorter maturities than concessional funds.The country has been borrowing more, borrowing at higher interest rates and borrowing for shorter term periods, meaning that loans become repayable more quickly and can thus cause cashflow problems.Clearly there is a serious problem. What can be done? It is not easy, but for the deficit to fall either Government revenue must increase (higher taxes) or expenditure must fall.No one would like to pay higher import duties, VAT or other taxes but if waste were eliminated, expenditure would fall, even if nothing else changes. This alone may not be enough, but it would be a start and then other means for reducing expenses can be found.It is better to face the problem early rather than let it go on until it blows out of control, like in Greece.
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