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Sunday January 29th, 2023

Sacked Sri Lanka scientist rejects ad hominem attack as fertilizer warning materialize

ECONOMYNEXT – A top Sri Lanka agricultural scientist who was sacked for publicly raising concerns over agrochemical ban said he had worked for the private sector due to his technical knowledge and he had never influenced the government on behalf of the private firm.

Professor Buddhi Marambe, 59, was sacked from all his government positions including the top advisor on agriculture after his criticism of the agro-chemical ban.

Ad Hominem?

Agriculture Minister Mahindanada Aluthgamage said Marambe was sacked due to a conflict of interest in his role as warnings of most experts over the sudden shift into organic fertilizer materialized.

“He has been raising his criticism of almost all the government policies including nano nitrogen,” Aluthgamage told reporters.

“Meantime I got complaints from a number of environmental organizations saying that he had served as a director of a chemical fertilizer company.

“Also there was a letter to me with information that he had worked against glyphosate ban by the Maithripala Sirisena government and as a consultant of private companies.”

“That is why I advised the secretary to remove him from all the posts.”

In Sri Lanka, ad hominem attacks are common in politics. An ad hominem (circumstantial) attack attempts to show the bias of the proponent of a position in a bid to sway listeners, without actually dealing with the merits of the case and trying to ascertain whether the facts of the argument itself are correct or not.

As a result, ad hominem attacks – also known as mud-slinging – are considered to be an informal logical fallacy.

Aluthgamage also said he was ready to withdraw his decision and to render a public apology to Marambe if the Professor of the University of Peradeniya proves he had not worked for the private sector agrochemical firm.

“What is said by the Hon Minister is correct – that I have provided services, being on the board of private sector company etc.,” Marambe told EconomyNext.

“When an agriculture-based private sector organization requests my support in their operations through proper channels, what are we to do as Sri Lankans and technically competent people?”

“Are we to ask those companies to obtain services from a Buddhist monk or a medical practitioner?” he questioned.

“I think we have to be happy when both state and private sector organizations invite us to serve them and technically support them in addition to what we offer.”

Looming Food Shortage

Marambe, a former Dean of Agriculture Faculty at the University of Peradeniya had been warning in recent newspaper articles that an overnight shift to organic fertilizer could lead to crop declines that in turn cause huge food shortages within months.

He cautioned that a crop failure would force the government to import food at a time when money printing has created a forex shortage.

In an article titled “A tragedy of relying on misinformation”, he said Sri Lanka is likely to import a major portion of basic food needs, such as rice, adding to external woes and reducing the domestic generation of value.

“I just can’t work out what is wrong in those if my scientific explanation is correct,” he said.

“If I brought in that agency for the discussion and forced their name on for any financial gains for the said company, then I do understand the basis for this allegation. So the Hon Minister needs not to apologize in public.”

“We have to empower all stakeholders in the agriculture sector in this country.

“As the case of the farming community, the private sector is important and their technical capacities should be built through continuing programmes.

“If we are not going to do that, especially when invited, who else will do that? That has been my position in the past, is now, and will be in the future.”

He also responded to the minister’s allegation over him being the reason to stop the ban on glyphosate, which was also banned citing it was causing chronic kidney disease.

“In the case of glyphosate, I went against the procedure adopted to ban the same.

“Previous government decided later, based on my presentation with others, to lift the ban for 36 months for tea and rubber thus providing an opportunity for the producers to have a gradual transition,” he said.

“Moreover, I did not object when the government allowed the importation of glyphosate through the Ceylon Petroleum Corporation. My effort was to safeguard the tea industry mainly though the rubber sector also got the benefit.”

He said the situation present regarding organic agriculture is the same.

Sudden Decisions

“All are sudden decisions without assessing the scientific facts and continue to make blunders one after the other,” Marambe said.

“So indeed there are similarities in the efforts I made on two policy decisions taken by the government,”

“When I fought for the glyphosate issue, where the company in which I was in as a non-executive Director (while continuing to work in the Faculty of Agriculture at the University of Peradeniya) did have the benefit.

“I did not even bother because the end result is that the tea and rubber sectors got the benefits.”

“If I had cried foul asking the government to give such a tender to the said company, then, of course, I would have been a person who had worked with a conflict of interest.”

President Gotabaya Rajapaksa in April banned all the chemical fertilizers, pesticides, and weedicides when the entire country was not ready to adopt only organic agriculture.

The administration has said chemicals were triggering non-communicable diseases including kidney disease and the move would save around 200 million dollars spent on imports.

However, as farmers’ protests grew with burning effigies of Aluthgamage with two horns and scientists warned of a looming disaster of food shortage, the government has relaxed a part of the fertilizer ban.

“In the present case, when the Ministry repeatedly made errors with a definite negative impact on agriculture, I cannot keep my mouth shut, and so did the others,” Marambe said.

“Our effort was to get the government in the correct course. The concept is noble but the operational mechanism is full of blunders.” (Colombo/Nov01/2021)

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Sri Lanka operators seek higher renewable tariffs, amid exchange rate expectations

ECONOMYNEXT – Sri Lanka’s renewable companies say they need tariff of 40 to 45 rupees a unit to sell power to the Ceylon Electricity Board and the agency owes them tens of billions of rupees for power sold in the past.

The association has strong exchange rate expectations based on the country’s dual anchor conflicting monetary regimes involving flexible inflation targeting with a reserve collecting target.

“In the coming year of course because of the rupee devaluation, I think the solar energy sector might require tariffs closer to RS 40 or RS 45, hydropower will also require tariffs on that scale,” Prabath Wickremasinghe President of the Small hydropower Developers Association told reporters.

“I think right now what they pay us is averaging around RS 15 to RS 20.”

Some of the earlier plants are paid only 9 rupees a unit, he said. The association there is potential to develop around 200 Mega Watts of mini hydros, 700 to 1000MW of ground mounted soar and about 1,000 rooftop solar.

In addition to the rupee collapse, global renewable energy costs are also up, in the wake of higher oil prices in the recent past and energy disruption in Europe.

The US Fed and the ECB have tightened monetary policy and global energy and food commodity price are now easing.

However in a few years the 40 to 45 rupee tariffs will look cheap, Wickremesinghe pointed out, given the country’s monetary policy involving steep depreciation.

From 2012 to 2015 the rupee collapsed from 113 to 131 to the US dollar. From 2015 to 2019 the rupee collapsed from 131 to 182 under flexible inflation targeting cum exchange rate as the first line of defence where the currency is deprecated instead of hiking rates and halting liquidity injections.

From 2020 to 2022 the rupee collapsed from 182 to 360 under output gap targeting (over stimulus) and exchange rate as the first line of defence.

“The tariffs are paid in rupees,” Wickremasinghe said. With the rupee continuing to devalue in other 5 years 40 rupees will look like 20 rupees.”

Sri Lanka has the worst central bank in South Asia after Pakistan. Both central banks started with the rupee at 4.70 to the US dollars, derived from the Reserve Bank of India, which was set up as a private bank like the Bank of England.

India started to run into forex shortages after the RBI was nationalized and interventionist economic bureaucrats started to run the agency. Sri Lanka’s and Pakistan’s central bank were run on discretionary principles by economic bureaucrats from the beginning.

The Central Bank of Sri Lanka was set up with a peg with gold acting as the final restraint on economic bureaucrats, but it started to depreciated steeply from 1980 as the restraint was taken away.

Now under so-called ‘exchange rate as the first line of defence’ whenever the currency comes under pressure due to inflationary policy (liquidity injections to target an artificially low policy rate or Treasuries yields) the currency is depreciated instead of allowing rates to normalize.

Eventually rates also shoot up, as attempts are made to stabilize the currency which collapses from ‘first line of defence’ triggering downgrades along the way.

After the currency collapse, the Ceylon Electricity Board, finances are shattered and it is unable to pay renewable operators.

Unlike the petroleum, which has to stop delivery as it runs out of power, renewable operators continue to deliver as their domestic value added is higher.

However they also have expenses including salaries of staff to pay.

The CEB which is also running higher losses after the central bank printed money and triggered a currency collapse, has not settled renewable producers.

“In the meantime, we have financial issues with the investors and CEB owns more than 45 million rupees in the industry,” Warna Dahanayaka, Secretary of Mini Hydro Association, said at the conference.

“We can’t sustain because we can’t pay the salaries and we can’t sustain also because of the bank loans. Therefore, we are requesting the government to take the appropriate action for this matter.”

Sri Lanka and Pakistan have identical issues in the power sector including large losses, circular debt, subsidies due to depreciating currencies.

In Sri Lanka there is strong support from the economists outside government for inflationary policy and monetary instability.

The country’s exporters, expatriate workers, users of unofficial gross settlement systems, budget deficits and interbank forex dealers in previous crises have been blamed for monetary instability rather than the unworkable impossible trinity regime involving conflicting domestic (inflation target) and external targets (foreign reserves).

The country has no doctrinal foundation in sound money and there is both fear of floating and hard peg phobia among opinion leaders on both sides of the spectrum regardless of whether they are state or private sector like any Latin American country, critics say.


South Asia, Sri Lanka currency crises; only 2-pct know monetary cause: World Bank survey

A World Bank survey last year found that only 2 percent of ‘experts’ surveyed by the agency knew that external monetary instability was generated by the central bank. Most blamed trade in severe knee jerk reaction. (Colombo/Jan29/2023)

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Sri Lanka top chamber less pessimistic on 2023 GDP contraction

ECONOMYNEXT – Sri Lanka’s top business chamber said it was expecting an economic contraction of up to 2 percent in 2023, which is much lower than projected by international agencies.

“The forecast of 2023 is quite negative in terms of the international forecasters,” Shiran Fernando Chief Economist of Ceylon Chamber of Commerce told a business forum in Colombo.

“Our view is that there will be some level of contraction, may be zero to two percent. But I think as the year progresses in particular the second half, we will see consumption picking up.”

The World Bank is projecting a 4.2 percent contraction in 2023.

In 2022 Sri Lanka’s economy is expected to contract around 8 to 9 percent with gross domestic product shrinking 7.1 percent up to September.

Most businesses have seen a consumption hit, but not as much as indicated, Fernando said.

“Consumption is not falling as much as GDP in sense and we are seeing much more resilient consumer,” he said.

Sri Lanka’s economy usually starts to recover around 15 to 20 months after each currency crisis triggered by the island’s soft-pegged central bank in its oft repeated action of mis-targeting rates through aggressive open market operation or rejecting real bids at Treasuries auctions. (Colombo/Jan28/2023)

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Acuity Knowledge Partners with Sri Lanka office to be bought by Permira

ECONOMYNEXT – Permira, an investment fund with operations in Europe, US and Asia is buying a majority stake in Acuity Knowledge Partners, which has a 500 seat center in Sri Lanka for a undisclosed sum.

Equistone Partners Europe, from which Permira is buying the stake will remain a minority investor, the statement said.

In 2019, Equistone backed a management buyout of Acuity from Moody’s Corporation.

Acuity Knowledge Partners says it serves a global client base of over 500 financial services firms, including banks, asset managers, advisory firms, private equity houses and consultants.

“Despite the current challenges for the financial services sector, we have experienced continued growth and a strong demand for our solutions and services,” Robert King, CEO of Acuity Knowledge Partners, said.

“Given the significant demand within the financial services sector for value-added research and analytics, and the need for operational efficiency, with Permira’s deep experience in tech-enabled services and its global network, I am confident the business will continue to flourish.”

London headquartered Acuity has offices in the UK, USA, India, Sri Lanka, Costa Rica, China and Dubai, UAE.

Equistone was advised on the transaction by Rothschild & Co and DC Advisory, and Latham & Watkins acted as legal counsel. Robert W. Baird Limited served as financial advisers to Permira, and Clifford Chance is acting as legal counsel.

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