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Part II – “IMF bailout” and future with Wickramasinghe

Published

2 years ago

September 26, 2022

editor

It was officially announced by the IMF on 01 September (2022) the SL government agreed with the IMF Staff on a Staff level Agreement for their 48 month “Extended Fund Facility” (EFF) package of USD 02.9 billion. Their official statement issued, says, “The agreement is subject to the approval by IMF management and the Executive Board in the period ahead, contingent on the implementation by the authorities of prior actions, and on receiving financing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors. Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.”
It thus means, the promised USD 02.9 billion would be released only after “the implementation by the (Sri Lankan) authorities of prior actions, and on receiving financing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors”.

Interestingly, “prior actions” are not clearly stated in the statement that mentions (i) major tax reforms (ii) cost-recovery based pricing for fuel and electricity (iii) raising social spending and improving social safety net programmes (iv) restoring price stability through data driven monetary policy and stronger Central Bank autonomy (v) rebuilding foreign reserves through restoring a market-determined and flexible exchange rate (vi) safeguarding financial stability (vii) Reducing corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, making the total list of key elements in the programme.

These have many contradictions and serious limitations. What would “cost-recovery based pricing” mean to the poor? It would mean increase of fuel prices and electricity charges. Fuel and electricity prices decide prices of every service and consumer product leading to a chain effect of price increases. The 90 percent food inflation prices the WFP calculated for the first half of 2022 would shoot beyond 150 plus at a minimum with this “cost-recovery based pricing”. Thus “restoring price stability” would mean nothing for the poorest 40 percent.

On tax reforms proposed, in Sri Lanka “indirect tax” is 84 per cent of annual inland revenue with VAT contributing a major share. Indirect taxes burden the poor and the vulnerable far more heavily than even the middle-income population. The richest hardly feel a pinch with indirect tax increases. In pre-Covid SL indirect tax paid through food consumption by the poorest 10 percent accounted for over 16 percent of their income while the richest accounted for a negligible 01.8 percent. Any increase of VAT would further increase the burden of the poor.

The key element “raising social spending and improving social safety net programmes” is stillborn with Wickramasinghe’s interim budget passed in parliament on 02 September, the day after the IMF Staff level agreement was announced, axing the school mid-day meal allocation from Rs.06.2 billion to 02 billion, completely halting the mid-day meal programme. This despite 35 percent of households struggling to feed their children one meal a day and malnutrition in the rise. Contrast this with increasing defence allocations that was Rs.177 billion in 2009, the year the civil war was concluded and the 2022 defence estimates of Rs.371 billion that goes untouched. Is this “raising social spending and improving social safety net programmes?”

Of all “key elements” proposed the last on “Reducing corruption vulnerabilities through improving fiscal transparency and public financial management,….”. is the most hilarious when neither party to the EFF assistance would make details public. They yet stand for “improving fiscal transparency and public financial management”.

Governor of the Central Bank (CBSL) Mr.Nandalal Weerasinghe, onetime IMF employee as an Alternate Executive Director representing SA countries, went public saying Sri Lanka had IMF funding 16 times before but agreements have never been made public or presented to parliament. “There is no practise like that” he told the TV anchor and added even debt restructuring cannot be made public as they include sensitive information related to “trade secrets”.

That there was no practise of making IMF agreements public in the past is known. What is not said is, details of IMF agreements kept out of public scrutiny had been adversely effecting SL. That is all the reason to break out of that non-transparent practise of the past. Reason to make all agreements and commitments public before they are officially accepted.

Calling “business deals” as “trade secrets” do not make them decent and clean. All huge unpayable dollar loans heaped on Citizens during the past carried with them “trade secrets” never made public by any means. Professionals and top bureaucrats have always been party to mega corruption with undisclosed information. State owned Lanka Marine Service privatisation in 2002 August and the 2015 April Bond Scam are clear proof. What confidence and trust can People have in bureaucrats handling debt restructuring with “trade secrets” entrenched?

It is therefore pertinent to ask the CBSL Governor, “will the best solution to restructure loans borrowed with no details made public leading to this massive tragedy be in the same way, keeping the public blind on trade secrets?”

It is also important to ask,

1. how does “secret” debt restructuring help pay back dollar loans?

2. will the “publicly unspecified” key elements help generate forex earnings to meet external trade cost without any more borrowings?

3. how will key elements help reduce the yawning income gap in society that keeps growing?

4. what is there in this IMF assistance for the rural poor to improve their lives?

Ground preparations for IMF assistance is already proving this economic revival is aimed at creating a society without basic human rights and with unrestricted labour exploitation. Amending labour laws have begun without any dialogue with trade union representatives. Minister of Labour is violating ILO Co-Convention No.144 by totally ignoring the tripartite forum “National Labour Advisory Council” (NLAC) established in 1994 to (1) promote social dialogue (2) provide government a forum “to seek views, advice and assistance” of worker organisations and employers on social and labour policies, labour legislations and international labour standards (3) promote good relations between stakeholders for the benefit of economic development and improving working conditions.

As media reports indicated, regulations enacted with restrictions on night and overtime work for female workers to ensure workplace safety have been either relaxed or reduced for the benefit of employers. Minister has instructed the Secretary to initiate reforms on labour laws including the Termination Act. Incidentally the Secretary to Ministry of Labour handling such reforms is one who was removed from the post of Commissioner General of Labour (CGL) and sent out of the department in 2020 October by then Minister of Labour on allegations of total bias for employer interests and corruption involved.

Arguments go on the basis Sri Lanka needs to attract more foreign direct investments for export manufacture to earn more dollars and that requires “free labour” for investors to come. There are around 1,700 factories operating with BOI-SL approvals enjoying everything from custom duty waivers to tax holidays, free infrastructure and more as incentives. BOI also has guidelines that allow investors to deny worker rights including organising trade unions in total violation of the Constitution of the country and ILO Conventions 87 and 98 signed and ratified by the SL government. Of all those factories, not more than a dozen and a half have allowed workers to organise trade unions. Of them, only about 05 factories have signed Collective Agreements (CA) with trade unions.

There is no forensic audit done to compare tax revenue forfeited and infrastructure expenses provided as incentives for foreign direct investors (FDI) for 40 years that in fact was public revenue as against what the People gained from FDIs in return. I will not be surprised if what we gained was a complete loss as against incentives provided.

What more are they asking for? Right for bonded labour? Labour law reforms carried out outside the NLAC without trade union representation would create an environment for bonded labour, though not in direct legal terms. It’s a flawed perception that non-unionised labour with packed incentives attract massive FDIs. While BOI creates the ground for non-unionised labour, increasing incentives have not been the issue for major investors to ignore SL.

Reputed major investors need labour in millions for large scale hi-tech manufacture. While China is beyond comparison, SL is nowhere close to countries like Bangladesh and Vietnam too. With adult populations of 104 million and 68 million respectively, they have large factories with workforces far exceeding the total at Katunayake FTZ that in pre-Covid era was only 31,000 employees. This in fact was half the number employed in the single multi-storey building Rana Plaza in Dhaka Bangladesh, that collapsed in August 2013 killing over 1,132 workers.

Sri Lanka therefore attract mostly runaway investors. They come for economic incentives in imports and exports. This was evident with 721 BOI approved companies closing down in 07 years by 2016 at an average of 103 per year. “Of the companies that closed down, all had received BOI concessions such as tax exemptions while 103 had leased BOI land” the investigative exposure confirmed. (https://www.sundaytimes.lk/170903/news/721-boi-companies-closed-down-from-2010-to-2016-257726.html)

All that said about preparing the ground for EFF assistance, the total approach of President Wickramasinghe is to revive the “free market economy” that for 40 years played the “ruthless devastator” of everything decent and progressive in society. As most have accepted, this “historical tragedy” allows Sri Lanka an opportunity to navigate itself towards a decent and an inclusive future. That demands “development” to be defined to begin with.

The shortest explanation would be, “a new path towards a decent, civilised society that treats all as equal, leaves no one behind and improves quality of life within a secured and a diverse environment creating a rich culture of human values”. Free or neo-liberal market economy within the global market during all its 40 plus years, was everything contrary to that.

Globally neo-liberalism is a disaster with Climate Change and Global Warming “wreaking havoc across the world and threatening lives, economies, health and food” according to UNEP’s “Climate Action Note”. In SL, we need no extra proof of what this free-market economy dishes out for the People. During the past decades a new breed of “filthy rich” dealers emerged within the free-market economy. With them social values, ethics and morals were completely deformed and destroyed leaving an extremely selfish “consumer” tirelessly running round to earn what is impossible for the larger majority. We are helpless with all State agencies going corrupt and inefficient leading to heavy trafficking and peddling of drugs, increase of extortions, minor and grave crimes, and also rape and child abuse turning into a daily occurrence. All political parties now depend on the “filthy rich” for funding. With all such barbarism around, the whole society is left at the mercy of unrestricted industrial pollution, illegal deforestations, sand mining, manmade floods and major landslides.

Is this the economic model we are planning once again to revive with IMF assistance? Is this the economic model that is marketed showcasing “massive growth” in China, Vietnam, South Korea, India and in few other countries where the majority are as poor and deprived as the poor in SL?

In China, average per capita GDP in coastal provinces is 113,365 Yuan with provinces like Shanghai enjoying a per capita GDP of 157,279 while in poor Central and Western China their per capita GDP is less than 44,000 Yuan. What is also not spoken of is the rich growing richer despite the pandemic. Forbes recorded world “dollar billionaire” number as 2,755 in 2021, an increase of 493. China now have 698-dollar billionaires, second to USA with 724 and above India with 237 billionaires.

Strength of all economies are spoken of forgetting the majority poor who are deprived of access to facilities and opportunities and a huge disparity in income. “Oxfam briefing paper – 2017” says “Today the world is facing an unprecedented inequality crisis. Over the last 40 years, there has been a vast increase in the gap between the rich and the rest”. That in fact is what the free market economy is about, apart from being an inherently corrupt city based economy. It is also about politically holding the poor and marginalised majority within the free market economy on a racist ideology created for electioneering.

EFF assistance of IMF has nothing that can guarantee, SL of negating these cancerous anti-social growths. Nothing that can reduce social crime, environmental disasters and massive corruption. Publicly unspecified activities in IMF assistance will not support improving social space, social dialogue and strengthening democratic structures, a fundamental necessity for decent social development.

Sri Lanka needs a different route out of this economic tragedy. This package Wickramasinghe is obsessed with would only marginalise more as poor and deprived under an increasingly authoritative and repressive regime. That will not make it easy for Wickramasinghe, heading a government on borrowed parliamentary majority. That may provide more clout for the Opposition call for a parliamentary election in February 2023. His advantage would still be an Opposition with no alternative programme for saner resolution of this crisis,

In short, call for tabling all EFF loan related IMF documents including proposals for restructuring of debts in parliament immediately for serious social discourse is now the responsibility of social activists outside parliament. Call for elections should be thereafter. As often stressed by me, the final demand, in this instance an election, should never be made the first. An election with none offering an alternate programme is not going to make any difference, though with different names and faces.

– Kusal Perera

21 September 2022

(kusalperera.blogspot.com)

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FEATURES

Why elections for Presidency all political parties have promised to abolish?

Published

3 weeks ago

April 1, 2024

nipuni

President Ranil Wickremesinghe is reported to have told the cabinet of ministers, priority has to be given to the IMF program to ensure economic stability and elections will have to be postponed till the IMF program is concluded. One newspaper report had it, the President had in fact informed the Election Commission too about postponing elections.

Postponing elections being a far cry, there is now a new debate mainly in Colombo circles, whether Basil’s request for a parliamentary election should precede the constitutionally scheduled Presidential election, or not. President Wickremesinghe is said to have told Basil then, it would be the Presidential election that would be held according to Constitutional provisions, but, if MPs need a parliamentary election sooner, they should have a resolution adopted in Parliament to that effect. This only needs a simple majority. With Mahinda Rajapaksa also endorsing the proposal for a parliamentary election first, Basil no doubt has the political clout to get the SLPP to move a motion in Parliament for a parliamentary election and have it passed. Yet they know, with no presidential candidate of their own, their future electoral politics will be a compromise with Wickremesinghe and they have to maintain space for a consensual path.

The main Opposition in Parliament, the SJB, has no intention in supporting Basil’s proposal for a parliamentary election before the presidential election, they have said. They are clear they want the Presidential election first. The JVP/NPP leadership is seriously in for a Presidential election. They are campaigning for the Presidential election with Anura Kumara as the candidate whom they believe has already won the election. All in all, Colombo seem to want a Presidential election for a “complete change” carrying the same rhetoric the “aragalaya” left as political chaos.

Sri Lanka does need a “change”
Fact remains, Sri Lanka does need a “change”. Not just a “complete change” but a huge change with a wholly new Constitution including the overhaul of the entire State apparatus and politics of governance right down to Local Government bodies. That change is not possible with an election for the Executive Presidency. That needs a new parliament, the legislative body for legislating the total change the people need. A change that begins with the abolition of the “Executive” Presidency, and transferring “executive power” back to Parliament.

Abolition of the “Executive” Presidency is a promise, a pledge given to people by all political parties at different elections during the past 30 years. It was the JVP that first demanded the abolition of the executive presidency at the October Presidential elections in 1994. After a bloody ruthless insurgency that was wiped out with equal brutality by State forces in late 1989, scattered remnants of the JVP regrouped and came to open politics at the 1994 August parliamentary elections contesting all districts except Jaffna, Vanni and Batticaloa in collaboration with Ariya Bulegoda’s Sri Lanka People’s Front (SLPF). They polled a mere 01.1 percent though the new leadership it was said, expected a total poll of 5% plus in few districts to be above the cut-off mark. JVP had only Nihal Galappaththi elected as their MP from Hambantota district, who was nominated as their presidential candidate at the 1994 October Presidential election.

After the parliamentary elections they realised, they would not poll even the 01.1% at a presidential election and thus made a compromise with the People’s Alliance (PA) presidential candidate Chandrika Kumaratunge (CBK) who was tipped to win the Presidential election. Negotiated through Minister Mangala Samaraweera, a very close personal ally of CBK, the JVP request of abolishing the Executive Presidency within six months from swearing in as president was conceded in writing and the JVP withdrew their candidate in support of CBK.

Interestingly, then “The Hindu” correspondent in Colombo met former President Jayewardene, the architect of the Executive Presidency and asked him “Sir, you said this executive presidency is so powerful, it cannot only change the gender. PA candidate Chandrika has promised to abolish it. What have you to say on that?” After his usual haughty laugh, Jayewardene had told him “Meet me after it is abolished. I will then tell you”.

No political leader would abolish such power

Jayewardene was certain no political leader would abolish such power in presidency with legal immunity, they are eager to sit with. Since 1994 October, in almost all elections political leaders tried to outmanoeuvre each other by promising total abolition, immediate abolition and even using the election to have the mandate to abolish the executive presidency calling it the sole reason for all evils in the country including mega corruption. We thus had all political parties that usually gain representation in Parliament agreeing to abolish the dangerously authoritative presidency, but none serious about it once elected. The JVP backed presidential candidates from Mahinda Rajapaksa in November 2005 to Maithripala Sirisena in January 2015, guaranteed the presidency would be abolished as the first most important task when elected. It was in fact the JVP who were vociferous about abolishing the presidency in those election campaigns.

What is politically a clear fraud now with JVP is, driving a heavily funded campaign to have their JVP/NPP candidate Anura Kumara Dissanayake (AKD) elected to that same ruthlessly dictatorial executive presidency they condemned and wanted abolished over the past 30 years as the sole reason for mega corruption. They now remain stony silent on abolishing of the presidency. What is more disgracefully hollow is the political narrative they ride on, claiming they would “use the power the People would vest with them in electing AKD as president to create a society with dignity and equality to all”.

Sri Lanka is certainly at crossroads

Sri Lanka is certainly at crossroads and helplessly so. None in mainstream politics would lead this country on a right path to freedom, democracy and an inclusive society with socio-economic and cultural development. These political leaderships simply have no valid “development program” to back their criticism of the past and the present and their request for political power at the next “presidential” election. A larger crisis therefore is the timidity of the educated urban polity that has access to new information, new knowledge and new social discourses beyond geographical boundaries. They need to accept they have a social responsibility in intervening to create a realistic valid social dialogue and to pressure Governments to stay course. Almost a total lack of their independent intervention in social dialogue has allowed political parties with their own sectarian agendas, possibly with laundered black money to manipulate media, especially social media to dominate social thinking in urban circles. What this country immediately needs therefore is an alternative, realistic intervention in deciding how a new and an effective change could be achieved. First it is about creating a social lobby that would independently engage and address the people. Next is about establishing a Government that would be held responsible for the change needed. Thereafter it is about holding that Government responsible for the change and in implementing reforms necessary at every step of the way, without going into the usual selfish life and waking up yet again when elections are called for.

It is therefore not about electing a president once again to the post that had been condemned, had been socially accepted as dictatorial and therefore promised to be abolished, transferring executive power back to Parliament. It is not the president who could abolish the presidency. It is not the president who could legislate reforms necessary. It is not the president who could allocate public funds for social necessities. All that needs a government in parliament with an active social lobby to hold the elected government responsible to the people. Thus, we at crossroads need a new political phenomenon with people deciding on elections, the next Government and most importantly holding that Government responsible in delivery, with the more advantaged urban polity leading the way. Well, they have to accept their social responsibility is far heavier than what they would like to accept.

– Kusal Perera

FEATURES

2024 Boao Forum: Accelerating net-zero transition in Asia

Published

4 weeks ago

March 27, 2024

nipuni

The Boao Forum for Asia Annual Conference is held in Qionghai, China's Hainan Province, March 26, 2024. /CFP

The Boao Forum for Asia (BFA) Annual Conference is being held in Boao, China’s southern province of Hainan from March 26 to 29. Its focus will be “Asia and the World: Common Challenges, Shared Responsibilities.” BFA Secretary General Li Baodong said this year’s BFA Annual Forum will focus on how the international community can work together to address challenges in the areas of four major topics: the global economy, social development, international cooperation and scientific and technological innovation.

National leaders, governmental officials, heads of international organizations, businesspeople, experts in various fields and the press will be invited from at least the 29 member countries of the BFA, which consists of most Asian countries.

The first BFA meeting was held in Boao in February 2001. Now, it is a unique opportunity for Asian countries to review and discuss common problems and develop common action plans and policies.

On March 18, a launching ceremony was held in Boao for the “Boao Nearly Zero Carbon Demonstration Zone” by the Ministry of Housing and Urban-Rural Development and the Hainan provincial government.

The project aims to showcase China’s green and low-carbon technologies and practices to the world in a demonstration zone focusing on “almost zero” emissions technologies, such as photovoltaics, wind energy collectors, energy storage systems, and an organic waste treatment project.

Located within this demonstration zone are the renovated BFA International Conference Center, a press center and a hotel all of which showcase low-carbon energy technologies. These renovations and demonstrations at the BFA conference facilities should establish the context for many of the sessions in this year’s BFA Forum. They should also set a shining example of the potential innovative technologies for a low-carbon world.

This year’s preliminary conference agenda for the four days of meetings includes numerous general discussions concerning the common issues and current trends facing the BFA member countries. In terms of the net-zero transformation of Asia’s energy systems towards zero-carbon power, there are also a number of sessions.

According to the International Energy Agency’s forecast, Asia will consume half of the world’s electricity by 2025, and as early as 2021, Asia’s carbon emissions accounted for half of the global emissions. Thus, Asia plays a key role in the transition to a low-carbon world. These BFA sessions will examine these potential transformations in Asia to grow the economy while at the same time reducing carbon emissions.

The transformation of low-carbon technologies will be highlighted in a number of technology innovation sessions, including “Accelerating Transition towards Zero-Carbon Power” on March 26, “Sustainability Disclosure, the New Normal” on March 27, “Green Development: Inspiring a Shared Future for Urban and Rural Communities” on March 28, and so on.

Clearly, the innovative energy transformation will be a significant part of the BFA final press conference, any resulting recommendations and actions, and any resulting reports. Accelerating the net-zero transformation of Asia’s power system is of great significance to the global response to climate change and the realization of green development worldwide.

BFA will help lead national governments, intergovernmental organizations as well as the private sector in Asia as they work together to promote the energy revolution and strengthen cooperation in all aspects of this very important transformation.

– Robert B. Weisenmiller
(news.cgtn.com)

– Robert B. Weisenmiller, a special commentator on current affairs for CGTN, is a research affiliate at the California-China Climate Institute, University of California, Berkeley, and a former chair of the California Energy Commission. The article reflects the author’s opinions and not necessarily the views of CGTN

(This story, originally published by CGTN has not been edited by SLM staff)

FEATURES

Backlash builds against Sri Lanka’s $3 Billion clean energy push

Published

4 months ago

December 21, 2023

editor

Utility scale wind, solar and battery projects draw CEB’s ire as they march to take away their vested interests.

The government has ignited a green energy investment spree that’s expected to reach as high as $ 3 billion over the next 3 years. The road to bringing this money in the economy, though, is increasingly hitting speed bumps from the likes of the so called ‘mafia’ CEB officials.

Country’s ambitious vision aims to make the nation’s electric grid greener with 70% of the electricity demand to be met through renewable energy by 2030.

Companies have already announced plans for committing $25 billion investment up to 2030 in the renewable energy sector in the Country, according to the Board of Investment.

With potential Private investments over the next 3-4 years through FDI could include $3 billion in utility scale wind, solar and battery storage projects – Sun Power leading with $1.5 billion, followed by Adani Green with $900 million, by Orbital energy with $200 million, by WindForce PLC with $150 million and balance by a consortium of private developers. However, the opposition to projects has mounted for myriad reasons.

Increasingly, the few so called ‘mafia’ CEB officials, who have strangled the Country’s power sector by delaying the approval process, seems to be more concerned that the rapidly expanding utility scale size of wind, solar and battery projects will irreparably alter their powers and thus their vested interests in earning a share out of the pie.

Despite this backlash, many projects will eventually get built, say developers and analysts, but they could take longer and cost more than expected.

At the government level, there is ample support for speeding up the implementation of the projects, but its only CEB who is pushing back on their own self-motivated agenda, not know at large.

– Harendra Kuruppu