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Tuesday May 30th, 2023

Sri Lanka to change privatization agreement of firms that do not raise salaries

ECONOMYNEXT – Sri Lanka will change the privatization agreements of plantations companies that do not raise salaries to 1,000 rupees a day, Finance Minister Mahinda Rajapaksa said.

The companies were privatized in the 1990s as they were mismanaged after expropriating from foreign and local investors resulting in monthly losses to the Treasury.

Prime Minister Rajapaksa claimed that plantations firms contributed about 25 percent of production while small holders have expanded.

“Under these circumstances, steps will have to be taken to encourage plantation companies that have become more successful and to review the privatization agreements of unsatisfactory plantation companies and to setup alternative investments that can be commercially developed,” Prime Minister Rajapaksa said in a budget for 2021.

“I also propose to increase the daily wage of plantation workers to Rs. 1,000 from January 2021.

“I intend to present to Parliament in January a legal framework that will change the management agreements of plantation companies that are unable to pay this salary and provide opportunities for companies with successful business plans.

He said smallholders were producing more.

However, plantations companies have said smallholders are giving productivity base wages of 30 rupees a kilo where workers were plucking over 30 to 40 kilos a day, while plantations workers were doing about 22 due to daily wages which are imposed mostly with government interference.

Two firms that are still in state hands have EPF in arears and are still bailed out by tax payers.

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Sri Lanka tax-payers fork out Rs600mn for state plantations

Sri Lanka has a history of expropriation which has hurt private investment and kept economic growth down.

Undermining private property rights is a form of the economic barrier killing business confidence which economists call ‘regime uncertainty’, where government policy is uncertain or threatens property rights.

“Such attenuations can arise from many sources, ranging from simple tax-rate increases to the imposition of new kinds of taxes to outright confiscation of private property, explains Economist Robert Higgs.

“Many intermediate threats can arise from various sorts of regulation, for instance, of securities markets, labour markets, and product markets.

“In any event, the security of private property rights rests not so much on the letter of the law as on the character of the government that enforces, or threatens presumptive rights.” (Colombo/Nov17/2020-sb)

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Sri Lanka cabinet approves President’s proposal to resume Japanese LRT after soared ties 

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers approved a proposal by President Ranil Wickremesinghe to resume the unilaterally cancelled Japan funded Light Rail Transit (LRT), cabinet spokesman said, as the island nation is in the process of mending ties with Tokyo.

However, any such deals are likely to take place after the debt restructuring and Sri Lanka starts to repay its foreign loans to come out of default, analysts say.

Former President Gotabaya Rajapaksa unilaterally cancelled the 1.5 billion US dollar LRT and East Container Terminal (ECT) projects in 2021. Japan agreed to fund the LRT project while it was one of the tripartite members of the ECT project along with India and Sri Lanka.

The abrupt cancellation hit the diplomatic ties between the two countries and Sri Lankan government officials have said Japan had given the project to Sri Lanka at a very lower financing cost.

President Wickremesinghe returned from Japan late last week after having met top officials of the Japanese government including its prime minister.

“In recent history, due to the stopping of several agreements and proposals suddenly, President Wickremesinghe went to Japan after creating the background to clear some of the worries we have,” Cabinet Spokesman Bandula Gunawardena told the weekly media briefing.

“Before he went, he got the approval from the cabinet to resume the discussion on the light railway project. He got the approval from the cabinet to get parliament approval for bilateral agreements signed or any other investments project. Any change or cancellation of a project could be done only with the approval of the parliament.”

Japan has backed Sri Lanka under Wickremesinghe’s presidency after the island nation declared sovereign debt default. (Colombo/May 30/2023)

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Sri Lanka to tighten grip on television with broadcast law

ECONOMYNEXT – Sri Lanka has formulated a broadcast authority law to regulate electronic media which will be made public soon, Cabinet spokesman Minister Bandula Gunawardana said.

“The draft prepared by a cabinet subcommittee under Justice Minister Wijedasa Rajapaksa has discussed with various parties will be given to all media institutions and broadcast media,” Gunawardana said.

“We do not have to hide or force anyone. A legal framework that can be acceptable to all for all sectors.”

“In a week or two Minister Wijedasa will discuss with state and private stakeholders.”

At the moment Sri Lanka has issued frequencies without conforming to an “international procedures”, he said.

In Sri Lanka television frequencies are issued under a state television act.

Successive administrations in Sri Lanka has since around 1980 mis-used state television duopoly which including for conducting elections according to critics.

Private television as well a raio emerged around the 1990s and has since over shadowed state media.

There have been calls by ruling party politicians from time to time to control private media. There is now calls to control social media.

At a Committee on Public Accounts meeting of the Department of Government Information, ruling coalition legislators called for regulation of television content. (Colombo/May30/2023)

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Sri Lanka rupee at 296.75/297.25 to dollar at open, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee opened at 297 /297.50 against the US dollar in the spot market on Monday, while bond yields were steady, dealers said.

The rupee closed at 296.75 /297.25 to the US dollar on Monday after opening around 296.50 /297.50 rupees.

A bond maturing on 01.09.2027 was quoted at 26.50/75 percent steady from Friday’s close at 26.50/65 percent.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 29/2023)

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