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Friday December 9th, 2022

Controversies Highlight Need For Greater Mindfulness About Repercussions

ECONOMYNEXT – The formulation of the draft 20th Amendment and its unanimous acceptance by the cabinet is indicative of President Gotabaya Rajapaksa’s dominant role in the government. The unanimous cabinet decision to approve amendment uncritically has paved the way for the political embarrassment the government currently faces with no one prepared to accept responsibility for it. It, therefore, took more than a week for the government to reach an agreement to appoint a committee to review the 20th Amendment after strong opposition criticisms highlighted several problems in the draft law. The president’s role stems from both his track record and popularity with the majority who voted for him and what he stands for. The president is seen not only as a leader who is committed to strengthening the country but also as a leader who will get things done with firm resolve.

Among those that the president is impressing are sections of the business community especially those who are seeking to be producers rather than traders. They see the president as being willing to cut through bureaucratic hurdles and provide approval for productive enterprises without getting tied down in problems of getting permits and approvals. Obtaining these permits which have proven to be tedious and discouraging in the past due to both inefficiency and attempts by those playing gatekeeper roles to extract bribes. The government’s prioritization of development as the way forward by expending decision making processes, both to improve the living standards of people and to make conflicts less intractable may explain some of its more controversial actions.

The permission given to engage in developmental activities in environmentally protected spaces is an indicator of the privileged position given to the goal of fostering development. The government is trying to promote import-substitution policies as the country is suffering from a foreign currency deficit in the aftermath of the Covid pandemic. Large loans taken in the past have to be repaid, foreign remittances from migrant workers have fallen and exports are more difficult with the results that imports need to be curtailed. It will be necessary for the government to be mindful of the inter-connections and the repercussions that can follow. A step by step approach might be preferable in reorienting the economy into one in which domestic production is prioritized as many economic outputs require imported inputs.

Natural Environment

Two of the main political debates in the country at the present time concern the 20th Amendment and the issue of environmental degradation that is taking place. There is an element of excess in both of these which need to be considered. An example would be the construction of a road in the protected reserve of the Sinharaja forest. The government’s go-ahead to develop the road was justified on the basis of impoverished village people asking for a wider road that would ease their burdens of transport and access to the markets outside. However, this same incentive would motivate others with much greater resources to come to that area and make use of the road for their own commercial benefit that could lead to greater deforestation. Environmentalists have complained that the road expansion is already causing many disturbances to the forest including illicit felling, removing soil and dumping it on slopes. An option to have considered would have been the relocation of the village rather than harming the forest.

In the aftermath of the new government coming to power, there has been a spate of development activities at the cost of the environment. Lagoons and forest lands are being utilized for development activities in many places. There is a need for Environmental Impact Assessments (EIA) of these activities. EIA is a process of evaluating the likely environmental impacts of a proposed project or development, taking into account inter-related socio-economic, cultural and human-health impacts, both beneficial and adverse. In addition, cost-benefit analysis needs to be done that goes beyond mere finances, but also includes social and long term costs and benefits.

Social cost-benefit analysis is a method to survey all the impacts caused by a development project or other policy measure. It comprises not just financial effects such as investment costs, direct benefits like profits and taxes but all the societal effects such as pollution and the impact on the environment. The main aim of social cost-benefit analysis is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned heterogeneous effects. As a result, these prices reflect the value society attaches to the caused effects, enabling the decision-maker to form an opinion about the net social welfare effects of a project.

Such a social cost-benefit analysis would incorporate factors such as the affinity of high-end tourists for Sri Lanka’s natural environment and for ethical development. Due to the three decades of war and the many atrocities that occurred during that period, Sri Lanka has gained an unfavourable international image that was being improved in the aftermath of the end of the war and the commencement of the national reconciliation process. However, the government’s withdrawal in February 2020 from the commitments given to the UN Human Rights Council in October 2015 and the failure to replace them with an indigenous model as promised can continue to jeopardise the country’s international image. There is a need for the government to be mindful of the repercussions of what it is doing. Political leadership involves all-round assessments much as a social cost-benefit analysis is needed in development project activities.

20th Amendment

A similar approach is needed in the case of the controversy that has erupted over the 20th Amendment. This constitutional amendment has been put on hold with a government-appointed committee to go into it and propose further amendments. The main feature of this proposed law is to transfer power away from other institutions and place it with the presidency. Both parliament and the judiciary which, together with the executive, form the three great branches of government, will become subordinate to the presidency if the 20th Amendment is passed into law in its current form. The question is the degree to which the strengthening of the presidency is appropriate in the context of constitutional governance.

The protests against the 20th Amendment have grown stronger with the passage of just a week. Initially, it was only the opposition parties that objected to it and raised their voice against it. But now even sections of the government and state apparatus have become emboldened to speak against the proposed law. The Sri Lanka Audit Inspectors’ Association has sent a letter to the president stating that the proposed 20th Amendment will harm the independence of the Auditor-General and the scope of public audit, and also to the mechanism for the exercise of public financial control. They have pointed out that several government departments and some 120 State-owned companies will be exempt from centralized government audit under the proposed 20th Amendment to the Constitution.

Objections have also begun to be voiced by government parliamentarians themselves. The 20th Amendment gives the president the power to dissolve the parliament after a year of its election and to sack the prime minister and any minister at any time and appoint others in their place. This may not be a problem at the present time when President Gotabaya Rajapaksa’s own elder brother is the prime minister. But this can become a problem in the future when different individuals are in those important positions. For longer-term democracy and political stability different arms of the government should not be subservient to the other but have their values and powers intact for better governance. The key factor to keep in mind is that politics and development are not only about going from one point to another in a straight line or in the shortest possible time. There is a need for greater mindfulness about possible repercussions and assess whether the overall cost-benefit analysis is positive.

Jehan Perera is the Executive Director of the National Peace Council

(Colombo, September 15, 2020)

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Sri Lanka shares fall on profit taking after nine sessions

ECONOMYNEXT – Sri Lanka shares slipped on Friday after gaining for nine straight sessions reverting from its highest gain in more than seven weeks on profit taking, brokers said.

“Bourse regressed to red ending the 9-day winning streak as investors resorted to book profits in blue chip counters,” First Capital Market Research said in it’s daily note.

The main All Share Price Index (ASPI) closed 0.54 percent or 47.84 points lower at 8,843.90.

The market witnessed a turnover of 1.6 billion rupees, lower than this year’s daily average turnover of 2.9 billion rupees.

The market saw a net foreign inflow of 1 million rupees. The total net foreign inflow stood at 22 billion rupees so far for this year.

The Paris Club group of creditor nations has proposed a 10-year debt moratorium on Sri Lankan debt and 15 years of debt restructuring as a formula to resolve the island nation’s prevailing currency crisis.

The government is in discussions with Asian Development Bank (ADB) and World Bank to get loans of 1.9 billion US dollars after a reform program with the International Monetary Fund is approved.

A policy loan now being discussed with the World Bank may bring around 700 million US dollars, Coomaraswamy told a business forum organized by CT CLSA Securities, a Colombo-based brokerage.

The Asian Development Bank may also give around 1.2 billion US dollars most of which will be budget support, he said.

In the last few sessions, market gained after the Central bank governor said interest rates should eventually ease despite the fears of a domestic debt restructuring as inflation falls, increased liquidity in dollar markets, and the inter-bank liquidity improves.

The more liquid index S&P SL20 closed 0.59 percent or 16.77 points lower at 2,827.72.

So far in December ASPI gained 2.2 percent.

The ASPI gained 0.5 percent in November after losing 13.4 percent in October.

It has lost 27.6 percent year-to-date after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

John Keells Holdings pulled the index down to close at 1.5 percent lower at 147 rupees.

Aitken Spence lost 2.0 percent to close at 141 rupees and Commercial Bank closed 1.4 percent down at 50.50 rupees a share. (Colombo/Dec09/2022)

 

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Sri Lanka bond yields end higher, kerb dollar Rs370/371

ECONOMYNEXT – Sri Lanka bonds yields ended up and the T-bills eased on active trade on Friday, dealers said.

The US dollar was 370/371 rupees in the kerb.

“The bond rates went up, however more interest was seen in the short term bills by the investors” dealers said.

A bond maturing on 01.05.2024 closed at 31.90/32.20 percent on Friday, up from 31.25/70 percent at Thursday’s close.

A bond maturing on 15.05.2026 closed at 30.30/31.30 percent steady from 30.30/31.00 percent.

The three-month T-bills closed at 30.75/31.30 percent, down from 32.00/32.25 percent.

The Central Bank’s guidance peg for interbank transactions was at 363.18 rupees against the US dollar unchanged.

Commercial banks offered dollars for telegraphic transfers between 371.78 and 372.00 for small transactions, data showed.

Buying rates are between 361.78 – 362.00 rupees. (Colombo/Dec 09/2022)

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Foreign minister, US ambassador discuss future assistance to crisis-hit Sri Lanka

ECONOMYNEXT — In a meeting in Colombo, Sri Lanka Foreign Minister Ali Sabry and US Ambassador to Sri Lanka Julie Chung discussed ways in which the United States can continue to support Sri Lanka going forward, the Ambassador said.

Chung tweeted Friday December 09 afternoon that the two officials had reflected on the “twists and turns” of 2022, at the meeting.

Minister Sabry was recently in Washington D.C. where he US Secretary of State Antony Blinken.

A foreign ministry statement said the two officials held productive discussions at the Department of State on December 02 on further elevating bilateral relations in diverse spheres, including the 75th anniversary of diplomatic relations which will be marked in 2023.

Incidentally, Sri Lanka also celebrates the 75th anniversary of its independence from the British in 2023, and President Ranil Wickremesinghe has given himself and all parties that represent parliament a deadline to find a permanent solution to Sri Lanka’s decades-long ethnic issue.

The US has been vocal about Sri Lanka addressing concerns about its human rights record since the end of the civil war in 2009 and was a sponsor of the latest resolution on Sri Lanka passed by the United Nations Human Rights Council. Unlike previous resolutions, this year’s iteration makes specific reference to the country’s prevailing currency crisis and calls for investigations on corruption allegations.

In the lead up to the UNHRC sessions in Geneva, Minister Sabry Sri Lanka’s government under then new president Wickremesinghe does not want any confrontation with any international partner but will oppose any anti-constitutional move forced upon the country.

On the eve of the sessions on October 06, Sabry said countries such as the United States and the United Kingdom, who led the UNHRC core group on Sri Lanka, are greatly influenced by domestic-level lobbying by pressure groups from the Sri Lankan Tamil diaspora.

These pronouncements notwithstanding, the Wickremesnghe government has been making inroads to the West as well as India and Japan, eager to obtain their assistance in seeing Sri Lanka through the ongoing crisis.

The island nation has entered into a preliminary agreement with the International Monetary Fund (IMF) for an extended fund facility of 2.9 billion dollars to be disbursed over a period of four years, subject to a successful debt restructure programme and structural reforms.

Much depends on whether or not China agrees to restructure Sri Lanka’s 7.4 billion dollar outstanding debt to the emerging superpower. Beijing’s apparent hesitance to go for a swift restructure prompted Tamil National Alliance MP Shanakiyan Rasamanickam to warn of possible “go home, China” protests in Colombo, similar to the wave of protests that forced the exit of former pro-China President Gotabaya Rajapaksa.

The TNA will be a key player in upcoming talks with the Wickremesinghe government on a solution to Sri Lanka’s ethnic issue. (Colombo/Dec09/2022)

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