What has happened to our EPF money?

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

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

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

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

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

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

"Employers’ contribution to the EPF in 2011 was Rs. 61.9 billion with a sum of Rs. 47.3 billion being withdrawn to pay back EPF money for retirees and this amounted to 76 per cent of the total contribution....In 2012 and 2013, 115,000 and 114,000 applicants had withdrawn Rs.48.7 billion and Rs. 50.2 billion, respectively.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

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

So what has happened to our money?

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

A couple of things raise a red flag.

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

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

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

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

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

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

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

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

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

Addendum:

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


  

The killing of planter Nihal Perera: still no justice

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

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

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

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

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

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

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

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


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

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

Sri Lanka's corporate sector: Is ignorance bliss?

“Eternal vigilance is not only the price of liberty; eternal vigilance is the price of human decency.”Aldous Huxley 


A question that came up amongst friends concerning the resignation of Jayantha Dhanapala from the board of Dialog Axiata. It is widely presumed to be a result of the conflict of interests between Dialog's policy of blocking websites (at the behest of the state) and Dhanapala's advocacy of transparency and governance through the Friday Forum.

Dhanapala's position was taken by Mahesh Amalean, a founder of MAS and a widely respected businessman.

The question that was raised was: Why did Amalean take up the position that was vacated in such controversial or at least dubious circumstances? Does Amalean not support transparency and good governance?

My hypothesis is that in all probability Amalean was never aware of the controversy in the first place. Why?  Are the vast majority of people, including those in the upper echelons of the private sector, ignorant of the larger issues of governance?

In my limited experience (for one does not broach such controversial subjects in the  corporate world) only a tiny minority are aware:

a. of the deplorable state of of the local media, including the nominally independent media, which is reluctant to highlight real issues or direct substantial criticism  towards the government,

b. of alternative news sources, on the web or on social media.

While mainstream print media do carry some columns or occasional pieces that are critical, these are tucked away in the inner pages, relegated to the features section which are seldom, if ever, read. Only the retired and the young have the time to delve through long features, busy executives tend to focus on headlines and a few summaries.

Corporate executives obtain most of their information from the mainstream media. That too mainly from the news and business sections which carefully steer clear of any controversy. People's opinions are views are shaped by the information they receive, the bland diet fed by the mainstream will only lull the mind to state of dangerous complacency.

If so, then the vast majority of the educated, literate and largely well-meaning people who occupy positions in the corporate sector are blissfully ignorant of the massive problems of governance that plague the nation and threaten its very existence.

They are aware of individual cases of corruption, of the difficulties in dealing with the state and its agencies, of abrupt changes in policy or process but they cannot connect the dots and the see the bigger picture.

Is it possible for someone to conduct a survey of the private/corporate sector to ascertain:

1. Their main sources of news.
2. Their awareness of alternative media.
3. If they are aware of alternative media, the frequency with which they access such sources.

What do you think? Are our corporate executives and leaders aware and informed? Or happy and ignorant?  Do you fall into the category of a happy hamster?





All you beasts of the field, All you beasts in the forest, Come to eat. His watchmen are blind, All of them know nothing. All of them are mute dogs unable to bark, Dreamers lying down, who love to slumber;  (Isaiah 56:10) 

Pieter Bruegel, The Blind Leading the Blind (1568)

Freedom and liberty

The denizens of the land that is referred to as Sri Lanka are supposed to be "free". The British ruled the territory until 1948 but since then it has been self governing and it's inhabitants, supposedly free.

Are we really free? Free to think? Free to write? Allowed to go about our affairs unmolested, secure in the knowledge that we cannot be falsely accused of wrong doing, of being questioned or detained without reason?

In the event of being detained, being assured of due process, the right to a fair hearing, the right to basic justice, not subjected to victimisation at the hands of the police, politician or indeed the Government in general?

Do we have real freedom of association, to meet and talk to people we want to? Do we have the freedom to practise our own beliefs, or non-beliefs as the case may be, unhindered, as long as we cause no nuisance to others?

Are we allowed conduct our business affairs in peace, to carry on lives in our own way, free from obstruction or interference?

The people who lived here before 1948 or before the rot set in, somewhere in the 1960's will probably tell you that they enjoyed these freedoms and liberties. Do we enjoy them today? Are we really free?

Our leaders are thought to be modeling the country's development on Singapore, witness the sprucing up of the city, the streets, the pavements and the park. These words, from Singapore's first Prime Minister, Lee Kuan Yew are prophetic; will our leaders continue to drive us down the path to ruin?

Ceylon was Britain's model Commonwealth country. It had been carefully prepared for independence. After the war, it was a good middle-size country with fewer than 10 million people. It had a relatively good standard of education, with 2 universities of high quality in Colombo and Kandy teaching in English, a civil service largely of locals, and experience in representative government starting with city council elections in the 1930s.

When Ceylon gained independence in 1948, it was the classic model of gradual evolution to independence. Alas it did not work out. During my visits over the years, I watched a promising country go to waste....

….....It is sad that the country whose ancient name Serendip has given the English language the word "serendipity" is now the epitome of conflict, pain, sorrow and hopelessness.

(From Third World to First: The Singapore Story: 1965-2000, p414, 418)

A question on the arts

Has anyone noticed the unevenness in the geographic distribution of great art in Europe?

For example the Dutch can claim some of the greatest painters but have produced almost no musicians of note?

The central Germanic-Austro Hungarian region has many great musicians but no serious painters or even writers ?(Goethe and Schiller excepted). The reverse is true of Britain, plenty of great painters and writers but only a handful of musicians.

In sculpture, Italy reigns supreme, all the great ones seem to be confined to that country, I have not heard of any major figure outside Italy.

The question is why is this so? Could one reason for the peculiar distribution of skills be economic?

In society, the arts require a minimum amount of leisure. Societies living on the margins of existence will rarely produce anything-people will be spending their time searching for food and the basics of existence, there is no time to spend on abstract thinking or creation.

With increasing wealth a society can support craftsmen and artisans who are not directly engaged the production of food or other necessities of life.

Could the different ways in which countries or regions developed have affected the way in which the arts developed?

The early civilisations of Greece and Rome set the philosophical and aesthetic  foundation for Western art. Emperors, Kings and the Church were early patrons whose dictates may have shaped the development of the arts before economies developed to the point where merchants and the general public could become supporters.

Perhaps they way training took place - the way the necessary skills were learned and transferred have played a part?

These are just questions that occurred to me. Does anyone have any thoughts? 
 

The BBS is run by the CIA!

This is what the Daily News has to day:

The sequence of events that led to the formation of the BBS (from around mid-2011 to late 2012) shows that the covert neocon teams operating from Colombo embassies found some “useful idiots” (in their own nomenclature), ripe for exploitation.

The “opportunity” for the neocons came in the form of Dilanthe Withanage, a graduate in Computing (1984) from the little-known Georgian Technical University, Tbilisi, Georgia, and the yellow-robed extremist Galabodaaththe Gnansissara…..

……..Withanage’s work history filled with a diverse range of short-term “careers”, pointing to a confused, overseas qualified local failing to get traction and Gnanissara’s own troubled past would have lit up the eyes of the neocons. Georgia where Withanage graduated, probably through sheer coincidence, happens to be the country where the CIA conspiracy of “Colour Revolutions” was first launched in 2003, installing the now-soured American puppet government of Mikheil Saakashvili through the so-called “Rose” revolution.

What a revelation.

The article closes with this:

It is time that the people of Sri Lanka, and the government, tell the BBS where to go. Dilantha Withanage and Galabodaaththe Gnanissara do not seem to need much help to get there!    

Now the Daily News clearly holds the BBS responsible for the problem. This is exactly what all independent analysts and observers have been saying all along.

 Now comes the revelation that not only is the BBS the cause, they are funded and run as a covert operation by the CIA with the intention of destabilising the Government. If this is correct then the interests of the Government and the BBS are on a collision course.

If this is the case, and given the outcry about the activities of the BBS why does the Government not follow the advice of the Daily News (and the call of it's own minister Vasudeva Nanayakkara) and arrest the leaders of this subversive group?
 
This is not the first time that the BBS has broken the law. On countless occasions, sometimes in full view of the police, they have been filmed damaging property, trespassing or unlawfully entering private property.

Yet, in the land that fearlessly defeated terrorism, they roam free and unpunished. Indeed the very architect of that fearful war chose to grace the occassion of the opening of a new building by the BBS.

Even if the Government was sleeping, why did the Daily News not rush to the forefront, to expose the subversive activity in Aluthgama and Beruwala while it was going on? They could have caught the CIA operatives red-handed. What better way to expose them? The Aluthgama attacks should have been headline news in the national press. Why wait for days in numbed silence before reporting on it?

It simply does not add up. The only logical explanation that fits the claims of the Daily News is that the Government, the BBS and the CIA are all in cahoots, all working to destabilise the country and ruin the peace.

Now that is something I can believe.


ps. *News Flash* Watareka Vijitha Thero, the moderate monk, (who previously was supposed to have attacked himself) has now been arrested!!!

Someone is supposed to have quipped that the situation is now worse than a parody, which just about sums it up. Welcome to Bananaland.

The sequence of events that led to the formation of the BBS (from around mid-2011 to late 2012) shows that the covert neocon teams operating from Colombo embassies found some “useful idiots” (in their own nomenclature), ripe for exploitation.
The “opportunity” for the neocons came in the form of Dilanthe Withanage, a graduate in Computing (1984) from the little-known Georgian Technical University, Tbilisi, Georgia, and the yellow-robed extremist Galabodaaththe Gnansissara.
- See more at: http://www.dailynews.lk/?q=features/conspiracy-behind-chief-aluthgama-actors#sthash.rnOaGInq.dpuf

The sequence of events that led to the formation of the BBS (from around mid-2011 to late 2012) shows that the covert neocon teams operating from Colombo embassies found some “useful idiots” (in their own nomenclature), ripe for exploitation.
The “opportunity” for the neocons came in the form of Dilanthe Withanage, a graduate in Computing (1984) from the little-known Georgian Technical University, Tbilisi, Georgia, and the yellow-robed extremist Galabodaaththe Gnansissara.
- See more at: http://www.dailynews.lk/?q=features/conspiracy-behind-chief-aluthgama-actors#sthash.rnOaGInq.dpuf

The sequence of events that led to the formation of the BBS (from around mid-2011 to late 2012) shows that the covert neocon teams operating from Colombo embassies found some “useful idiots” (in their own nomenclature), ripe for exploitation.
The “opportunity” for the neocons came in the form of Dilanthe Withanage, a graduate in Computing (1984) from the little-known Georgian Technical University, Tbilisi, Georgia, and the yellow-robed extremist Galabodaaththe Gnansissara.
- See more at: http://www.dailynews.lk/?q=features/conspiracy-behind-chief-aluthgama-actors#sthash.rnOaGInq.dpuf

"No Limit" outlet in Panadura Petrol bombed

Update from Twitter 10:40pm 21st June

Dinouk Colombage ‏@Dinoukc 26m

Tense situation has been reported in Panadura as reports emerge of people stoning houses. Police and STF have been deployed

Navamani Newspaper ‏@NavamaniLK 30m

Panic situ in Thottawatte and Sarikamulla STF and Police have been deployed in the area #lka

Navamani Newspaper ‏@NavamaniLK 34m

Some unidentified persons who had arrived in Thotawatte Panadura has attacked 2 house n dissapared on being confronted by residents#lka

Updates from Twitter- 11am, 21st June

The Muslim-owned "No Limit" stores' outlet in Panadura was attacked in the early hours of this morning, possibly with petrol bombs. Fortunately nobody appears to have been hurt but the store is in flames. Four fire brigade trucks are currently attempting to douse the fire.

The Daily Mirror has reported that the fire may have been caused by an electrical fault. However employees, who were sleeping in the staff quarters, and neighbours have both apparently said they heard 10 explosions from the store.
 

Recent updates from Twitter reproduced verbatim below, images & tweets from Rifas M Kaleel, Dinouk Colombage and Navamani:

This motorcycle was burnt outside the store, GM of store asks how could internal electrical fire cause this.

 

STF keeping agitated crowd yelling police 2 arrest those responsible over burning of No Limit store

Crowd building outside burn No Limit store. Police trying to clear them away

 STF using armored vehicle to clear crowd that is becoming agitated with police

Employees, who were sleeping in the staff quarters, and neighbours have both said they heard 10 explosions from the store

General Manager of the store says 4 employees were sleeping in staff quarters at the time of the fire. No injuries reported.

Police believe petrol bombs may have been used to start the fire. 

CcTV cameras outside are undamaged, however, police believe main tapes inside are destroyed.

Retired policeman, who lives next to the store, claims several explosions took place beginning at 2.30am.

Armed soldiers are now joining the STF to "maintain the peace" in Panadura.

Witnesses say several men were seen fleeing from the direction of the store shortly before the fire. Police say they have no suspects.

Armored STF being dispatched around the town of Panadura to ensure no further issues arise.

   

Anti Muslim violence

Update 17th June:

Given the media blackout on the events, the main source of information is Twitter. Search for and follow updates from #Aluthgama. For those without Twitter accounts check Groundviews, for some updates. There is also a new report from DBS Jeyaraj.

The latest round of violence is the inevitable  result of a campaign that started about a year and a half ago. I put up a number of posts on the subject, which I have now tagged under one label for easy access. 

There is still a dearth of information but columnist DBS Jeyaraj has put up a summary of the latest events and incidents that  on his blog and the Daily FT also carries a report.

Anti - Muslim violence breaks out

Reports are emerging on Twitter of what appears to be a wave of anti-muslim violence that has broken out in Aluthgama, Beruwala and other parts of the Western coast. The trigger appears to have been the BBS rally held in Aluthgama this afternoon.

Pictures from The Virakesari Twitter feed:

Pictures of unrest also available on the BBC Sinhala FB page.

Summary of tweets below (updated to 10pm, 15th June 2014):

Under "indefinite" police curfew: Aluthgama (clashes Thurs & 2day) & now Beruwala (one of oldest #muslim settlements in #srilanka). #lk

Rpts: Muslim shops burnt, Buddhist rally stoned, police teargas; seq of events unclear. Muslim homes/mosque later stoned: witnesses

Police blanket being imposed on media. Many being stopped from entering Aluthgama now

Police refusing to comment, phone of spokesperson now switched off

Reports from the ground in #Aluthgama: crowds gathering again on Masjijd Road, Hospital Road, Simon Silva road. 

The tense situation in #Aluthgama is worsening, got a call from Aluthgama. All land line cut. Where is the media? Government? 

400 STF deployed in #Aluthgama. Situation calmer in Dhargatown now. Some reports of violence in New Town area. DT mosque has called for calm

At least 10 shops were under fire in Aluthgama according to Lankadeepa, Police spokesman says situation normalised now 

Reports of houses being torched in Meeri Penna, Sapula Kanda Road, Aluthgama. 

Police curfew announced in Beruwela, as attacks reported from many areas, Police to provide security for all mosque around Sri Lanka.

video journalist attacked in aluthgama tenese situation.he's camara also break by mobs.

Tense situ reported from Kotiyakubura, Group led by Buddhist monks protesting against a new school constructed with Kuwait embassy funds

Muslim Council of welcomes Police curfew and urges Govt. and Police to protect Muslims and their estalishments

"I don't know who attacked first but once clash started it was like a war " BBC reporter in Aluthgama who escaped unhurt

Houses torched in Kotapitiya, Mathugama. Mosque attacked in Panadura: reports.

Attack on Muslims n business premises by BBS mob brought from outside area was planned attempt to provoke Muslims to retialiate n clash  

Police curfew announced in Aluthgama after clashes between Sinhala & Muslim groups, at least 2 TV journalist attacked

The above are reproduced verbatim from Twitter. I have no independent information to cross-check the above but readers are invited to provide any further information available. 

A response to Dayan Jayatilleka's Post Election 2015 Scenario

Dayan Jayatilleka has written something about a possible post election scenario.

Well I must say Mr Jayatilleka seems to have awoken from a deep slumber to find that the stuff his nightmares have come to life.

He claims "an entirely predictable response to perceptions of external and ethnic siege from afar and the ‘near abroad’. We have the Gang of Four of David Cameron, Samantha Power, Jayalalitha and Navi Pillay to thank for the prospective radicalization"

What utter nonsense. 

For those of us who were wide awake while Mr Jayatilleka was speaking up and standing up for the regime, these trends were apparent from the very start of 2005, from the time the family descended en-masse from all corners of the globe.

I first looked at the issue in 2008 and more recently a couple of months ago.

He goes on to say "The North will get the Gaza treatment. In the South the Weliweriya Doctrine will be more in evidence than not. There will be “two, three, many” Rathupaswelas. "

The Weliveriya doctrine, as Mr Jayatilleka terms it is only the logical result of the culture of impunity that prevailed in the military that enabled the war victory. It follows incidents in Chilaw (fisherman killed), Katunayake (worker killed, factories smashed by Government goons) and a couple of others. The war victory was a result of a no-holds barred, assault. Whether these tactics went against the rules of war we cannot tell, but there is a lot of very uncomfortable material that is surfacing.

As for this:

"The hard-line will include neo-isolationism in foreign relations, a firmer positioning on an Islamabad–Beijing axis, and greater reliance on Israel.

Is this not already already very much in evidence? I agree though that this will get worse, so we will be keeping company with Zimbabwe and other rogue states.

As for the election, it is not the opposition candidate that will matter. I reckon that all that will matter is the quantum of resources the rulers will pour into the election (state, crony, and perhaps (shockingly) even some personal funds?) and how many they are prepared to kill.

Exposed: Rights Advocacy A Gateway To Lavish Lifestyles

This was the rather lurid headline for a story about alleged financial irregularities at the CPA.

There are questions of governance at hand but we need to understand what is of legitimate public interest and what is not. The private lives of individuals, however debauched, are of no interest to the public at large unless it happens to involve public property, funds or resources.

Let us try to understand the issues at hand. There is an allegation that there are incorrect or wrongful expense claims being made.

How do we define what is incorrect or wrongful? If this were a person holding public office it would be covered under the Financial Regulations and the Administrative Regulations.

As a privately funded institute it would be governed by whatever internal policies are applicable, which we do not have access to. The person making the allegations claims that it is against policy, but we have no way of knowing what the policy is and are therefore not in any position to judge.

Dinner at a restaurant sounds like good fun, but it may be legitimate if the people entertained were those falling within the applicable rules (if any) at CPA.

This brings me to the crux of the problem: there is an allegation of financial irregularity but since this institute takes no public money, is of no interest to the ordinary citizen; apart from perhaps providing some cheap and tawdry entertainment. This is a matter for the donors and staff of the institute to worry about. It is not that governance is unimportant, it is just that this matter is not of any public interest.

People may disagree with work of CPA, the causes they advocate or the message they give. These need to be judged on their own merits, although I admit that an organisation that acquires a reputation for being misgoverned may find its public legitimacy eroded.

If it were PUBLIC money, TAXPAYERS money, THEN there is legitimate public interest in ensuring that there is no abuse. Public servants and bodies are funded by taxpayers, which is why the rules they are governed by are public. It would be possible to determine what types of spending were permitted and the procedures to be followed in the case of a public body and therefore make some informed judgement about the basic case being made. If it is our money it is in our interest to find out how it is spent and if that spending is to our benefit.

This is why matters of misgovernance and corruption in public bodies by public officials must be pursued relentlessly. When it concerns private money and individuals it is only in the interest of those involved to investigate. It's not our money so who cares?

Instead of looking at the real issues, I'm afraid all that is happening here is some rather cheap thrills, people oohing and ahhing over size of the bill and the choice of courses.

I think there are some much bigger issues that we have to worry about.

Why is the President taking over the Buddha Sasana and Cultural Ministries?

A report in the Ceylon Today claims that the President will take over the ministries of Buddha Sasana and Cultural Affairs. These ministries were previously under the purview of the Prime Minister D.M Jayaratne, a senior SLFP figure.

Is this a move to sideline the Prime Minister or otherwise clip his wings? The rivalry between the First Family and the old party hands of the SLFP is well know and thought to be worsening. The reason cited for the takeover: "failure in providing an adequate response to various religious problems and conflicts" rings rather hollow - in the first place the problem is one of law and order, not religion; in the second place what about the new Religious Police Unit that was supposed to have been set up to deal with the problem?

Could this also represent another change in stance - to try and bring more religion into politics? Perhaps a change in strategy prompted by or inspired by the meeting with India's Prime Minister, Modi? Most likely a bit of both, I would guess, although readers are invited to suggest other, more sinister motives that may come to mind.

It is not that the President does not have enough responsibilities already, his official website lists no fewer than thirty two statutory institutions that come under his purview; from the Salaries and Cadre Commission to the Ceylon German Technical Training Institute. This is apart from the Ministry of Defence, The Ministry of Finance and the Ministry of Religious Affairs (and all the bodies that come under them) adding up to a grand total of seventy eight.

   
From an administrative perspective this is quite ridiculous, there is no way that any person can devote sufficient time to pay proper attention to the issues that can crop up under each of the bodies or even review their budgets or spending. I imagine that things must be running either completely independently under these bodies with no interference or that a lot of approvals are stuck in very long queue awaiting his Excellency's attention, with work being frozen until an appropriate decision is reached.

Any which way ones looks at it, its very strange and very silly. One hopes it is not a sinister step on the road to theocracy.

Why autocrats hate social media

Its official. The Dear Leader hates social media and warns darkly of its many ills. 

We have witnessed the corrupt use of social media including the internet, to create domestic unrest and cyber crime".the President observed.

"Youth have been targeted, and they have become pawns of the misplaced agendas. These are dangerous trends that need to be arrested, and addressed...

He is not alone in this view either. The question is why?

In a word - its about control. Traditional media can be controlled; through a variety of means ranging from licenses to abuse of the tax code to intimidation. The number of media houses in a country may be few dozen and their identities well known which makes control possible.

The problem with social media is that one is dealing with hundreds of thousands of individuals, some of whom are anonymous. Since the individuals are not as easy to track and monitor as organisations they are a lot harder to get a hold of, let alone control. Lacking any obvious restriction they start to talk about things that the rulers would rather not hear about.

Some of what is said on social media may be foolish or trivial but amongst all the chaff there may lie seeds of doubt. Seeds that may cause people to think, or look at something differently. Something that may break the spell. In other words, very dangerous.

Doubtless todays autocrats look back with nostalgia to an earlier age, when ideas had to be shared on paper. In Romania Ceausescu  wanted every typewriter owned by the state registered with the Securitate, along with a sample of its type. A new decree forbade the renting or lending of typewriters, and the ownership of a typewriter required special authorisation.

Ah, they sigh. How much simpler things were then! Working out how to control social media is now uppermost on the minds of all self-respecting autocrats, and this is what they seemingly do when they meet at forums such as the Conference on Interaction and Confdience Building Measures in Asia (CICA) where the president uttered his missive against social media.

Interestingly the CICA was founded by Nursultan Nazarbayev, the strongman of Kazkhstan. According to the Economist he is:

...not only the president but also the “Leader of the Nation” and he can stand for re-election as long as he lives.

With more than two decades at the helm, Mr Nazarbayev has not built a system based on rule of law; instead he oversees a patronage network in which he stands as the final arbiter.

There are more than a few parallels with Kazkhstan, such as this:

In late 2011, a long-simmering strike in the western town of Zhanaozen, where oil workers were demanding higher wages, boiled over. Video footage showed police shooting unarmed protesters in the back as they fled. At least 15 people died, all of them civilians

 Birds of a feather will flock togther, no?

We have witnessed the corrupt use of social media including the internet, to create domestic unrest and cyber crime".the President observed.
"Youth have been targeted, and they have become pawns of the misplaced agendas. These are dangerous trends that need to be arrested, and addressed effectively through this forum.
- See more at: http://www.dailynews.lk/?q=local/social-media-subversion#sthash.mSO6CQcj.dpuf

We have witnessed the corrupt use of social media including the internet, to create domestic unrest and cyber crime".the President observed.
"Youth have been targeted, and they have become pawns of the misplaced agendas. These are dangerous trends that need to be arrested, and addressed effectively through this forum.
- See more at: http://www.dailynews.lk/?q=local/social-media-subversion#sthash.mSO6CQcj.dpuf

We have witnessed the corrupt use of social media including the internet, to create domestic unrest and cyber crime".the President observed.
"Youth have been targeted, and they have become pawns of the misplaced agendas. These are dangerous trends that need to be arrested, and addressed effectively through this forum.
- See more at: http://www.dailynews.lk/?q=local/social-media-subversion#sthash.mSO6CQcj.dpuf

The imploding economy

It has not gone down with a bang, but with a whimper, deflating slowly over the past couple of years, as this report points out.

The Government, is desparately trying to do something to boost it, including promoting pawning. I think pawning is connected with poverty but with such limited demand for credit I suppose they do not have much options.

There are of course some other ways to revive things such us restoring the legal system, reducing corruption, improving transparency and generally allowing a framework in which businesses can work. Limiting the participation of the state, reducing taxes and managing the fiscal deficit will also help.

Naturally, not one of these will even be considered since they go against the very grain, the very foundations of the regime.

Businessmen are slowly waking up to the reality that things are not quite good, although not many have the capacity to connect the dots to see the larger picture. Dreams of a postwar economic boom have faded, the promised boom being as false as the peace on which it was supposedly built.

Meanwhile we can continue to expect rosy pronouncements on how well the country is doing and how great the shiny new buildings and roadways look. That they are all built with debt, probably cost more than they can ever earn back over their life and are, in financial terms, white elephants is not often understood.

I think the good Governor should start hosting his own show, I can even provide him with a title "Cooking with Cabral". At least it would give Nigella Lawson a run for her money.



  

Treachery most foul

"The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it." ~Terry Pratchett, The Bromeliad 

And here I was, wondering why it was so difficult to maintain an open mind! The theme of the month is the anniversary of the war victory. As it draws closer the saviours are preparing for a suitably rousing celebration, with lots of sparkle and bang.

But what of the betrayers? Those who sold their souls (or other organs, where souls were lacking) for, in the words of Corporal Nobby Nobbs, a pot of massage?

For a change, should we not use the opportunity to denounce them?  It would be good to maintain a list, just so that we know who they are and shudder appropriately when their dreadful names are mentioned.

So here we go:

The Tea Party must be promoting tea, which is a good thing for us tea exporters. In old England it was Guy Fawkes who tried to have a bit of a party, in the Paradise Isle there was a varied lot including:

1. Rauff Hakeem and seven others.
2. The six of the UNP (Abdul Cader, Lakshman Seneviratne, Earl Gunasekere, Manushya Nanayakkara, Upeksha Swaranamali, Nimal Wijesinghe).
3. The LSSP and CP.
4. P H Piyasena of the TNA
5. Citizen's Front MP, Sri Ranga


These are not very 'big' names politically, speaking. Rauff Hakeem is the most prominent, probably because of his habit of criss-crossing the political firmament like a comet.

What these non-entities did in this instance was to vote in favour of the 18th Amendment, the thing that scuttled the ship. These were all opposition MP's, had they not voted the bill would not have passed. To add insult; Hakeem was quoted as saying "My conscience is clear. I know I have not sought any opportunistic favours".

Perhaps what liberals should do is organise a Bonfire Night every 8th of September, to commemorate the passing of the 18th amendment, complete with fireworks, bonfires and the burning of the Guy. Why let the infamy pass, or pass up an excuse for a party?

ps. The Le Monde diplomatique has come good commentary on the 18th Amendment.

New state-of-the-art military hospital opened

The President opened a new military hospital, supposedly the largest in the country last week. Equipped with state-of-the-art facilities, it has cost around Rs.3,500m; equivalent to around 9% of the entire capital expenditure budgeted for health in 2014.

While I am generally opposed to an enlarged role of the state in public life, spending on health and and education are generally benign. The spending in these areas still requires rigorous scrutiny to maximise the public good, but it is much better than, say,  spending it on the bureaucracy (which is expected to swallow Rs.317,000m in salaries and allowances alone in 2014).

The need for a new military hospital arose because of the need to free the land occupied by the old military hospital in Galle Face, for development. The old military hospital was a part of the army headquarters at Galle Face that contained some rather gracious colonial buildings.

(The old military hospital, borrowed from here)

 I hope whatever development is planned preserves the nicer old buildings, it's been a long time since I went that way but remember that they seemed quite impressive. The hospital had wide verandah's, a bit like the Galle Face Hotel.

The more serious question is whether the spending priorities are right.

As I write, my father is sitting in an ordinary ward of the National Hospital in Colombo, awaiting treatment for a fractured toe. The hospital is crowded and the cleanliness leaves something to be desired, a far cry from the conditions in a private hospital. The family tends to be a bit traditional in outlook, they would not consider spending on a private hospital. At least he has a bed of his own and we have brought him a few extra pillows and sheets. The standards in rural hospitals, though, may be worse.

Instead of putting down tonnes of concrete on airports and ports that receive no traffic, wasting billions running airlines why don't they spend on something that would be of real use to the public? Something that is a real necessity? Sri Lankan Airlines lost Rs.30.1bn in 2014, over eight times the cost of the new military hospital.

On questions of health, the public are faced with a choice of paying through their nose for private care or poor conditions in the state system. Company medical plans usually cover private hospitals but for pensioners or retirees it unaffordable and there is no real halfway house between the two.

Actually there is a very decent halfway house between the two extremes, the Merchant's Ward of the National Hospital. This offers good care and conditions at very reasonable rates, something that is affordable to the middle class. (Rajaratarala has a good post on the conditions in the Merchant Ward).

The problem is that it is impossible to get into the Merchant Ward, since it is always occupied by politicians. We have hundreds of these bandits and they all use the Merchant ward so its impossible for ordinary people to access, unless one is very lucky.

This is the really sad irony of our Banana Republic, not only is the country being raped by the political class, they also perversely monopolise access to essential infrastructure. The Merchant's Ward is supposed to be 95 years old, who built it or why I do not know, I can only say it would be a lot more useful to invest in things like this than the grandiloquent infrastructure mushrooming everywhere.  

Sri Lanka's burning problem: the law of primogeniture

Sri Lanka has only one burning problem to resolve: the law of primogeniture. When I last looked at this problem some resolution was needed by 2017.

Five years on, thanks to the 18th amendment to the constitution we have bought ourselves a few more years to tackle the issue. Although we are no closer today than we were in 2008 we have until 2020 or 2021, depending on when the Presidential poll will be held.

The question is: could the succession follow Ottoman lines?

Kingship in Muslim dynasties has tended instead to pass between brothers. But whose son should then inherit the throne? Ottoman sultans solved this problem by murdering their brothers.

The Ottomans believed in the survival of the fittest; every prince had an equal claim to the throne. Succession meant dispute and dispute was settled in the only way it could – through intrigue and warfare – since you couldn’t exactly file a lawsuit. It was believed that the winner (or survivor) would make the most competent and least depraved Sultan.

Sibling rivalry and open competition in a royal free market was common to the tribes of the Central Asian Steppes – the same tribes from whom the Ottomans had originated. Anyone who could claim to be the Sultan’s son – legitimate or illegitimate – was welcome to compete. Unlike their European counterparts, the Ottoman royal family did not obsess with marriages and appropriate royal blood lines, which helped them avoid inbreeding without impeding their capacity for insanity. (Taken from here)

An interesting question, is it not?

Looking behind Sri Lanka's declining FDI

Despite the generally rosy economic numbers that are frequently in the news I don't think the economy is in good shape. Some of these weaknesses are evident in the recent Central Bank report.

Crucially, FDI in 2013 was down 2.7%, (to US$ 916m) and youth unemployment rose to 19.2%, (in 2012 it was 16.8%). Looking behind the FDI numbers reveals and even worse state of affairs.

To start with some basics, what is FDI and why is it important?

The IMF defines FDI as investment as that made

“with the objective of establishing a lasting interest in an enterprise resident in an economy other than that of the investor (direct investment enterprise). ”Lasting interest” implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the direct investor on the management of the direct investment enterprise.”

Simply put, FDI is investment in actual businesses: in factories, services (eg software development) or other trades. It is important to distinguish FDI from portfolio investment, which is what happens when an investor buys shares or lends money to an existing business.

Portfolio investment is useful in the long term in helping develop a market for capital that businesses could potentially tap for future expansion, but it does not lead to immediate job creation.

FDI generally implies new investment, which in turn implies that this creates new jobs. The first step towards improving the livelihood of people is to be able to offer them jobs. Direct investment is what generally creates jobs. It does not matter whether the direct investment is foreign or local, what matters is whether it creates jobs, preferably well paying ones.

Investment depends on savings, which is scarce in poor countries. Poor countries with low incomes have low savings, which in turn means low investment and few jobs. This is a vicious circle that can be broken if there is sufficient investment from abroad to make up the local shortfall, hence the importance of FDI.

High youth unemployment maybe be expected if investment is low, something that the statistics seem to bear out. Unemployment in the entire labour market is much lower (4.4% according to the Central Bank, up from 4% in 2012) which could be explained by migration for jobs overseas. The unemployed youth of the country find employment overseas, which brings down the overall unemployment statistics.

Examining the composition of Sri Lankan FDI reveals still further weaknesses. The biggest source of FDI is from Malaysia, the bulk of which comes from Dialog Axiata, the mobile phone operator. Having spent some years working for the telecoms industry I can testify that telco investments in this country (not just those of Dialog, but of the industry as a whole) are singularly unproductive and create little or no employment.

Why is this? The problem lies with the regulator, which does not ensure that a proper infrastructure sharing regime is in place. Each telco operator view its infrastructure with a jealous and proprietary eye, a source of competitive advantage. In simplistic terms the argument is thus: putting up a new tower opens up a new market. Why share it with other operators? The bigger operators try to squeeze out the smaller ones by refusing to share their infrastructure. Nothing illustrates this better than Airtel's experience when they entered Sri Lanka in 2008.

The telco market was fairly well developed by 2008 so there was little need to invest in the major towns. The large operators however refused to share their infrastructure with Airtel, hoping to frustrate them in to quitting the industry. After languishing for a while Airtel decided that they would stay but were forced to start building their own network from scratch, an expensive and wasteful process.

Building a bridge across a river is very useful and allows communities on either side to trade. Building multiple bridges in the same area serves no purpose. It is the same with duplicated telco infrastructure. 

Naturally this new investment would have been reflected in a favourable boost in the FDI statistics but it would have created little in the way of increased productivity or employment since the country had no need for an entire new network, built from scratch. This is the sorry tale that is played out on a larger scale in the industry as a whole.

It is not that there is no sharing at all, there is some sharing, but almost always on a limited reciprocal basis. An operator usually needs to give access on one of their own towers before they can hope to get anything anywhere else. Certain critical parts, such as SLT's fibre backbone are pretty much closed off. If this where shared properly a lot of radio towers would be redundant.

Not only is the lack of sharing wasteful, it is also ugly, as towers not strictly necessary scar the landscape, destroying the view of the countryside, not to mention creating a huge unnecessary drain on power (the towers consume a lot of electricity). The carbon footprint alone should be enough incentive for the regulator to ensure proper sharing, never mind the strain on the electricity system, which itself is in crisis. 

The financial losses are evident in the low return on investments seen in the telco sector which should be of concern to their shareholders and bankers (see note below). Unfortunately, the much larger social price for these white elephants is paid by society at large.

The regulator exists to ensure that these social costs are minimised. Instead of doing its job, the TRC is building a massive tower of its own on the Beira lake, doubtless to the great satisfaction of the building contractor and the people involved in doling out the juicy contracts. Why bother to regulate, when there are more interesting opportnities for personal enrichment through doling out construction contracts?

Another contributor to FDI are the Chinese infrastructure projects – which again create few jobs or opportunities since they are built with Chinese labour and use a high volume of imported material. The FDI comes in but a lot of it simply then goes out, leaving the economy itself little benefited.

Thus not only is the FDI number declining, a fair chunk of what comes in creates little economic impact, which means things are even worse than they seem.


Note:
SLT reported an ROI of 6.8% in 2013 and 6.35% in 2012, while Dialog reported an ROI of 9.42% and 14.07%. Return was calculated using profit and adding back net interest cost. This was divided by equity and total borrowings. As the telco sector is highly geared it is necessary to include debt as part of the investment.

Update:

Another significant source of FDI is the United Arab Emirates - the bulk of which probably represents investments by Etisalat, another mobile operator.