Sri Lanka

ඩොලර් මිලියන 480ක එම්.සී.සී ප්‍රධානය ප්‍රතික්ෂේප කිරීමට තරම් සාධනීය හේතුවක් නොමැත

Originally appeared on Citizen.lk

එම්.සී.සී. ප්‍රදානය පිළිබඳ තීරණය කැබිනට් මණ්ඩලය විසින් ප්‍රමාද කළහොත් ප්‍රවාහන යටිතල පහසුකම් සංවර්ධනය කිරීම සහ ඉඩම් කළමනාකරණය වැඩිදියුණු කිරීම සඳහා ශ්‍රී ලංකාවට  ලැබීමට නියමිත පොලී රහිත ආධාර අහිමි විය හැකිය.

වැරදි තොරතුරු ප්‍රචාරය කරන්නන්ගේ උත්සහයන් සහ පාලක ‘සභාගය’ අතර දේශපාලන වෙනස්කම් හේතුවෙන් ශ්‍රී ලංකාවට ඇමරිකානු ඩොලර් මිලියන 480 ක මිලේනියම් චැලෙන්ජ් කෝපරේෂන් (එම්සීසී.) ප්‍රදානයක් අහිමි වීමේ අවදානමක් ඇත. එම්.සී.සී. ප්‍රදානය, ශ්‍රී ලංකාවට මෙතෙක් තනි මූලාශ්‍රයකින් සැපයෙන විශාලතම ප්‍රදානය වන අතර රටේ ආර්ථික වර්ධනයට ඇති සමහර සංරෝධකයන් නිරාකරණය කිරීමට වටිනා අවස්ථාවක් ලබා දේ.

ශ්‍රී ලංකා රජය විසින් ඉදිරිපත් කරන ලද යෝජනාවකට ප්‍රතිචාරයක් ලෙස මෙම ප්‍රදානය පිරිනැමීමට නියමිතව  තිබියදීත්, පවතින දේශපාලනික දුෂ්කෘතිය හේතුවෙන් රජය අවසන් ගිවිසුමට අත්සන් කිරීමට අපොහොසත් වී තිබේ. කැබිනට් අනුමැතිය නොලැබුනේ නම් සහ සැප්තැම්බර් 18 වන දින එම්.සී.සී. මණ්ඩල රැස්වීමට පෙර එකගතාවය අත්සන් කිරීමට අපොහොසත් වුවහොත් ශ්‍රී ලංකාවට මෙම ප්‍රදානය අහිමිවීමේ අවදානමට ලක්ව ඇත.

එම්සීසී එකගතාවය යනු කුමක්ද?

එම්සීසී එකගතාවය යනු එක්සත් ජනපද රජයේ විදේශ ආධාර ඒජන්සියක් වන මිලේනියම් චැලෙන්ජ් කෝපරේෂන් විසින් අරමුදල් සපයනු ලබන ප්‍රදානයකි. එක්සත් ජනපද රාජ්‍ය දෙපාර්තමේන්තුවේ සහ එක්සත් ජනපද භාණ්ඩාගාරයේ ප්‍රධානීන් එහි අධ්‍යක්ෂ මණ්ඩලයේ සිටියද, එම්.සී.සී. ස්වාධීනව වෙනම ආයතනයක් ලෙස ක්‍රියාත්මක වේ. යහපාලනය සඳහා කැපවීම, සෞඛ්‍ය සේවා, අධ්‍යාපනය සහ ආර්ථික නිදහස සඳහා ආයෝජනය කිරීම ඇතුළු විවිධ නිර්ණායකයන් මත රටවල් තෝරා ගැනීම සඳහා ආධාර ඒජන්සිය තරඟකාරී ක්‍රියාවලියක් භාවිතා කරයි. සුදුසුකම් ලත් රටවල්, ලෝක බැංකුවේ වර්ගීකරණයට අනුව ඉහළ මධ්‍යම ආදායම් ලබන රටවල් වලට පමණක් සීමා වේ.

2017 දී ශ්‍රී ලංකා රජය විසින් ඉදිරිපත් කරන ලද යෝජනාවකට ප්‍රතිචාර වශයෙන් ශ්‍රී ලංකාවට වසර 5 ක ඇමරිකානු ඩොලර් මිලියන 480ක් ප්‍රදානය කර තිබේ. තෝරාගත් රටවල් ආර්ථික වර්ධනය සඳහා ඇති බාධක හඳුනා ගැනීම සඳහා සංරෝධක විශ්ලේෂණ අධ්‍යයනයකට යටත් කෙරේ. ශ්‍රී ලංකාවේ අධ්‍යයනය මෙහෙයවනු ලැබුවේ හාවඩ් විශ්ව විද්‍යාලයේ ජාත්‍යන්තර සංවර්ධනය පිළිබඳ මධ්‍යස්ථානයේ සහ එම්.සී.සී හි සහය ඇතිව ශ්‍රී ලංකා රජය විසිනි. 

හඳුනාගත් සංරෝධක මත පදනම්ව, සංයුක්තය සිය අරමුදල් මගින් වර්ධනය සඳහා වන තීරණාත්මක බාධක දෙකක් විසඳීමට උත්සාහ කරයි: (1) ප්‍රමාණවත් නොවන ප්‍රවාහන යටිතල පහසුකම් සහ සැලසුම්; සහ (2) කෘෂිකර්මාන්තය, සේවා අංශය සහ කාර්මික ආයෝජකයින් සඳහා ඉඩම් සඳහා ප්‍රවේශය නොමැතිකම. 

ප්‍රවාහන ව්‍යාපෘතිය මගින් කොළඹ අගනගරයේ බස් පද්ධති නවීකරණය කිරීමට සහ වඩා හොඳ රථවාහන කළමනාකරණයක් තුළින් මාර්ග ජාලවල කාර්යක්ෂමතාව ඉහළ නැංවීමට අපේක්ෂා කරයි. ප්‍රවාහන වියදම් අඩු කිරීමට සහ රටේ මධ්‍යම කලාපය සහ දිවයිනේ සෙසු ප්‍රදේශවල වරාය සහ වෙළඳපොළවල් අතර සංචලතාව ඉහළ නැංවීමටද මෙම ව්‍යාපෘතිය මඟින් කටයුතු කරයි. ඉඩම් ව්‍යාපෘතිය ඉඩම් සඳහා ප්‍රවේශය වැඩි දියුණු කිරීමට සහ ඉඩම් තක්සේරුකරණ පද්ධති වැඩිදියුණු කිරීමට උත්සාහ කරයි. ජාතික ඔප්පු ලේඛනය ඩිජිටල්කරණය කිරීම සහ රටේ ඉඩම්වල නෛතික පාලනය ශක්තිමත් කිරීම කෙරෙහි ද මෙම ව්‍යාපෘතිය අවධානය යොමු කරනු ඇත.

විරෝධතාවයේ ස්වභාවය

ගිවිසුමට එරෙහි විරෝධතාවය වැඩි වශයෙන් කේන්ද්‍රගත වී ඇත්තේ බාහිර භූදේශපාලනික අභිප්‍රායන් පිළිබඳ  සහ ශ්‍රී ලංකාවේ ජාතික ස්වෛරීභාවයට ඇති තර්ජන කෙරෙහි පවතින බිය මතය. එම්.සී.සී පිළිබඳ අතිශයෝක්තිය, අත්පත් කර ගැනීම සහ හරස් සේවා ගිවිසුම (ඒසීඑස්ඒ) සහ බලකායන් ස්ථානගත කිරීමේ ගිවිසුම  (සෝෆා) අළුත් කිරීම සම්බන්ධ කතිකාව සමඟ ද බැඳී පවතියි. කෙසේ වෙතත්, එම්.සී.සී. ස්වාධීන සංවර්ධන නියෝජිතායතනයක් බවත්, ශ්‍රී ලංකා සංයුක්තය මිලිටරි ගිවිසුම් හා සම්බන්ධ නැති බවත් එම්.සී.සී ප්‍රකාශක වරුන් විසින් පැහැදිලිවම තහවුරු කර ඇත. ශ්‍රී ලංකා සංයුක්තයට ඔවුන් අතර ඇති සම්බන්ධතාවය අවම කිරීම සඳහා එක්සත් ජනපද රජය විසින් මෙම මිලිටරි ගිවිසුම් දෙක එතැන් සිට අත්හිටුවා ඇත.1

මෙම ව්‍යාපෘති හරහා එක්සත් ජනපද රජයට ඉඩම් අත්පත් කර ගැනීම සහ ශ්‍රී ලංකා භූමිය තුළ හමුදා කඳවුරු ඉදිකිරීම සඳහා වන රහසිගත මෙහෙයුම් පිළිබඳව ද බියක් මතු වී ඇති අතර, ඉදිරි මැතිවරණයට පෙර එකගතාවය අනුමත කිරීමට කැබිනට් මණ්ඩලයේ කැමැත්තට එය බාධාවක් වී ඇත. ඉඩම් ව්‍යාපෘතිය පිළිබඳ ප්‍රසිද්ධියේ ලබා ගත හැකි තොරතුරු වලට අනුව (එය මුළු ප්‍රදාන අයවැයෙන් 14% ක් පමණක් නියෝජනය කරයි), විධිනියෝගය අපේක්ෂා කරන්නේ හුදෙක් රජයේ පරිපාලන ධාරිතාවය ශක්තිමත් කිරීමට සහ තාක්‍ෂණික වැඩිදියුණු කිරීම්වලට සහාය වීමට ය. ප්‍රදානයේ විශාල කොටස (ඇමරිකානු ඩොලර් මිලියන 350 ක ප්‍රවාහන ව්‍යාපෘතිය) පොදු ප්‍රවාහන යටිතල පහසුකම්1 ප්‍රශස්තීකරණය කෙරෙහි අවධානය යොමු කර ඇත. මෙම ව්‍යාපෘති ශ්‍රී ලංකා රජය විසින් ක්‍රියාත්මක කිරීමට නියමිතය. මතු වී ඇති බිය පිළිබඳ කිසිදු යථාර්ථික පදනමක් ඇති බවක් නොපෙනේ.

රට මැතිවරණයකට ආසන්න බැවින්, නව ජනවරමක් ඇති ජනාධිපතිවරයෙකුට එම්.සී.සී. පිළිබඳ අවසන් තීරණය ගැනීමට ඉඩ දිය යුතුය යන තර්කය නිසැකවම යෝග්‍ය වේ. නමුත් සැප්තැම්බර් කාලසීමාව අනුව, මෙය ශ්‍රී ලංකාවට බලා සිටීමට කාලයක් නොමැති විය හැක.

බලය පවරන එක්සත් ජනපද ප්‍රඥප්තිය විසින් සංවර්ධන ව්‍යාපෘති1 සඳහා අඩු ආදායම්ලාභී සහ පහළ මධ්‍යම ආදායම් ලබන රටවලට අරමුදල් සැපයීමට පමණක් ඉඩ දී ඇති අතර, ශ්‍රී ලංකාව ඉහළ මධ්‍යම ආදායම් ලබන රටක් බවට පරිවර්තනය වී ඇති හෙයින් මෙම ඒම්.සී.සී ප්‍රදානය ප්‍රාග්ධනීකරණය කරගැනීමට ඇති අවස්ථාව අහිමි වී යා හැකිය. එම්.සී.සී. සැප්තැම්බර් මාසයේ දී මණ්ඩලය රැස්වූ විට, ඉහළ මධ්‍යම ආදායම් ලබන රටක් ලෙස රට වර්ගීකරණය කිරීමේ පදනම මත ප්‍රදානය සඳහා ශ්‍රී ලංකාව නුසුදුසු යැයි කල්පනය කළ හැකි බවට ඒම්.සී.සී.ය  ශ්‍රී ලංකා රජයට දැනුම් දී තිබේ.

මෙම කාලසීමාව සැලකිල්ලට ගෙන, සැප්තැම්බර් 18 වන දින මණ්ඩල රැස්වීමට පෙර කැබිනට් මණ්ඩලය විසින් ප්‍රදානය පිළිබඳ අවසන් කැඳවීමක් කිරීම හදිසි කාරණයකි.

අපට එය අවශ්‍ය වන්නේ ඇයි?

පසුගිය දශකය තුළ ශ්‍රී ලංකාවේ සංවර්ධනයට බොහෝ සෙයින් ධාවක වී ඇත්තේ රජය විසින් විශාල ලෙස වියදම් කිරීමෙනි. කෙසේ වෙතත්, දුර්වල බදු ආදායම (2018 දී දළ දේශීය නිෂ්පාදිතයෙන් 11.8%), ඉහළ අයවැය හිඟයන් (2018 දී දළ දේශීය නිෂ්පාදිතයෙන් 5.3%1) සහ දැවැන්ත ණය (සමස්ත රජයේ ණය 2018 දී දළ දේශීය නිෂ්පාදිතයෙන් 82.8% ක්2 විය) සමඟ වර්ධනය සඳහා රජයේ වියදම් මත දිගින් දිගටම යැපීම තිරසාර නොවන තත්වයට පත්වී තිබේ. ශ්‍රී ලංකාවේ මූල්‍ය මූලාශ්‍ර අතළොස්සක් වෙතින් ඉහළ ණය සංකේන්ද්‍රණයක් පැවතීම හේතුවෙන් බාහිර කම්පන සහ දුර්වල ජාතික සාර්ව ආර්ථික කළමනාකරණයට සහජයෙන්ම අවදානමට ලක්ව ඇත. 2018 දී, ශ්‍රී ලංකාවේ ණය ගැනීම් වලින් අඩක් පමණ පෞද්ගලික ප්‍රාග්ධන වෙළඳපොළවලින් ලබා ගත් අතර, 2018 දී ලබා ගත් මුළු ණය වලින් තුනෙන් එකක් පමණ චීනයෙන් පැමිණේ1. මෙය ශ්‍රී ලංකාවේ ආර්ථික වර්ධනය සහ විදේශ ප්‍රතිපත්ති ස්ථාවරය යන දෙකටම දැඩි අස්ථායී ඇඟවීම් දක්වයි. 

එම්.සී.සී. ප්‍රදානයට මෙම ගැටළු දෙකටම විසඳුම් සැපයිය හැකිය. ව්‍යාපෘති ක්‍රියාත්මක කිරීම, සංවර්ධන මූල්‍ය ප්‍රභවයන් විවිධාංගීකරණය කරන අතරම ඉඩම් පරිපාලනය සහ අභ්‍යන්තර සංචලතා විකල්පයන් වැඩිදියුණු කිරීම සඳහා අත්‍යවශ්‍ය යටිතල පහසුකම් නිර්මාණය කරයි. අසමාන සංවර්ධනය හා අවුල් සහගත ඉඩම් පරිපාලනය ශ්‍රී ලංකාවේ ආර්ථික වර්ධනය පවත්වාගෙන යාමට විශාල බාධාවක් වී තිබේ.

අවසන් පිරිවැය-ප්‍රතිලාභ විශ්ලේෂණයේ දී සහ ප්‍රසිද්ධියේ ලබා ගත හැකි තොරතුරු මත පදනම්ව, සංයුක්තය ආකර්ශනීය සංවර්ධන අවස්ථාවක් ඉදිරිපත් කරන බව පෙනේ. එම්.සී.සී. යනු ප්‍රදානයක් මිස ණයක් නොවන අතර එබැවින් ආපසු ගෙවීම අවශ්‍ය නොවන බව සැලකිල්ලට ගැනීම වැදගත්ය. නියමිත වේලාවට එකගතාවය අත්සන් කිරීමට රජය අපොහොසත් වුවහොත් සහ ව්‍යාපෘති තනියෙන් කිරීමට ගැනීමට උත්සාහ කරන්නේ නම්, එයට අවශ්‍ය අරමුදල් වෙනත් බාහිර ප්‍රභවයකින් ණයට ගැනීම අවශ්‍ය වේ. 

මේ වසර මුලදී රජය විසින් ඇමරිකානු ඩොලර් බිලියන 1 ක ජාත්‍යන්තර බැඳුම්කර වාර්ෂිකව 6.85% ක පොලී අනුපාතයකට නිකුත් කරන ලදී. අනාගත ණය ගැනීම් මෙයට සමාන තත්වයන් යටතේ සිදුවෙතැයි අපට උපකල්පනය කල හැක. මෙයින් අදහස් කරන්නේ රජය ණය මුදල ආපසු ගෙවීම පමණක් නොව, ශ්‍රී ලංකාවේ දැනටමත් වර්ධනය වෙමින් පවතින ණය තත්ත්වය වැඩි කරමින් ඒ සඳහා සැලකිය යුතු පොලියක් ද ගෙවීමට සිදුවන බවයි.

ප්‍රදානයට එරෙහිව තර්ක කිරීමට බලාපොරොත්තු වන්නන්, ඔවුන්ගේ තර්ක අප විසින් බැරෑරුම් ලෙස සැලකිය යුතු යයි සිතනවා නම් අදාළ ලියකියවිලි කියවා බලා නිසි සාක්ෂි සැපයිය යුතුය. මෙම අවස්ථාවෙහිදී, රජය විසින් සැප්තැම්බර් 18 ට පෙර එකගතාවය අත්සන් නොකිරීමට තීරණය කරන්නේ නම්, එය ජාතික ණය බර වැඩි කිරීමට මෙන්ම අත්‍යවශ්‍ය සංවර්ධනය ප්‍රමාද කිරීම තෝරා ගැනීමේ අවදානම දරා සිටී. එවැනි තේරීමක් පදනම් විය යුත්තේ හොඳ තර්කනයන් සහ සාක්ෂි මත ය. එය පුද්ගල ගැටුම්, නිරර්ථක බිය පතුවන්නන් හෝ සුළු දේශපාලනය නිසාවෙන්  නොවිය යුතුය.

View this article in English here.

No good reason to back out of the $480 million MCC grant

Originally published in the Daily FT, Daily News ,Sunday Observer ,Colombo Telegraph and Republic Next

Sri Lanka could lose out on interest-free aid to develop transportation infrastructure and improve land management, if the Cabinet delays decision on the MCC grant.  

Sri Lanka is at risk of losing a US $480 million Millennium Challenge Corporation (MCC) grant due to a campaign of misinformation and political differences among the ruling ‘coalition’. The MCC grant represents the largest grant from a single source Sri Lanka has ever received and presents a valuable opportunity to fix some of the country’s constraints to economic growth.  

Despite the fact that this grant is being offered as a response to a proposal submitted by the Sri Lankan Government, rampant political dysfunction has resulted in the Government failing to sign the final agreement. Sri Lanka is now at risk of losing the grant, if it does not receive Cabinet approval and fails to sign the agreement prior to the September 18th MCC Board meeting.

What is the MCC Compact?

The MCC Compact is a grant funded by the Millennium Challenge Corporation, a foreign assistance agency of the U.S. Government. Although heads of the U.S. State Department and U.S. Treasury sits on its board, the MCC operates independently as a separate entity. The aid agency uses a competitive process to select countries on a variety of criteria that include a commitment to good governance, investing in healthcare, education and economic freedom [1] . The pool of eligible countries is also limited to those falling under the threshold for the World Bank’s classification for upper-middle income countries.

Sri Lanka has been awarded a US $480 million 5-year Compact in response to a proposal submitted by the Sri Lankan Government in 2017 [2]. Selected countries then go through a constraints analysis study to identify the bottlenecks for economic growth. Sri Lanka’s study was led by the Sri Lankan Government with the assistance of Harvard University’s Centre for International Development and the MCC.  

Based on the constraints identified, the Compact seeks to address two critical impediments to growth through its funding: (1) inadequate transport logistics infrastructure and planning; and (2) lack of access to land for agriculture, the services sector, and industrial investors. 

The Transport Project seeks to modernise bus systems in the Colombo Metropolitan Region and optimise efficiency of road networks through better traffic management. The project will also work to reduce transport costs and increase mobility between the central region of the country, and ports and markets in the rest of the country. The Land Project seeks to improve access to land, and improve land valuation systems. The project will also focus on digitising the national deeds registry and strengthening legal governance of land in the country. 

The nature of opposition 

Much of the opposition towards the agreement has centred on fears about ulterior geopolitical motives and threats to Sri Lanka’s national sovereignty. Hype surrounding the MCC has also become intertwined with discourse surrounding the renewal of the Acquisition and Cross Servicing Agreement (ACSA) and the Status of Forces Agreement (SOFA). However, MCC spokespersons have categorically confirmed that the MCC is an independent development agency and the Sri Lanka Compact is not linked the military agreements. These two military agreements have since been placed on hold by the U.S. Government to mitigate concerns about their connection to the Sri Lanka Compact [3]. 

Fears have also been raised about covert operations for the U.S. government to acquire land and build military bases on Sri Lankan territory through the projects, hindering the willingness of Cabinet to approve the agreement prior to the upcoming elections. According to publicly available details on the Land Project (which represents only 14% of the total grant budget), the mandate seeks to merely strengthen government administration capacity and assist with technological improvements. The larger part of the Compact (the USD 350 million Transport Project), is focused on optimising public transportation infrastructure [4].  The projects are to be implemented by the Sri Lankan government. The fears raised don’t seem to have any basis in reality.

There is certainly merit to the argument that given the country is so close to an election, a President with a fresh mandate should be allowed to make the final decision on the MCC. Yet given the September deadline, this may not be a luxury that Sri Lanka has.  

The authorizing U.S. statute only allows the MCC to fund low income and lower-middle income countries for development projects [5], and as Sri Lanka has transitioned into an upper-middle-income country, its window of opportunity to capitalise on the MCC could be closing. The MCC has communicated to the Sri Lankan Government that there is a possibility that when the Board meets in September, Sri Lanka may be deemed ineligible for the grant on the basis of the country’s classification as an upper-middle income country.

Given this looming deadline, it is a matter of urgency that the Cabinet makes a final call on the grant before the September 18th Board meeting. 

Why do we need it?

Much of Sri Lanka’s development over the last decade has been driven by high levels of government spending. However, with weak tax revenues (11.8% of GDP in 2018 [6]), high budget deficits (5.3% of GDP in 2018 [7]) and enormous debt (total government debt was 82.8% of GDP in 2018 [8]), it has become unsustainable to continue relying on government spending to drive growth. Sri Lanka’s high concentration of borrowing from a handful of financing sources, has also made it inherently vulnerable to external shocks and poor national macroeconomic management. In 2018, approximately half of Sri Lanka’s borrowing was from private capital markets, with nearly a third of total borrowing in 2018 coming from China [9]. This has severely destabilising implications for both Sri Lanka’s economic growth and it’s foreign policy position.  

The MCC Compact could go a long way in addressing both of these issues. Implementation of the projects would diversify sources of development finance while creating essential infrastructure to improve land administration and internal mobility options. Uneven development and chaotic land administration have become major obstacles to Sri Lanka’s sustenance of economic growth.

In the final cost-benefit analysis, and based on the publicly available information, the compact seems to present an attractive development opportunity. It is important to note that the MCC compact is a grant, not a loan and therefore is not required to be repaid. In the event that Government fails to sign the agreement in time and seeks to undertake the projects on its own accord, it would need to borrow the funds from another external source. 

Earlier this year the government issued international bonds of US$1bn at an annual interest rate of 6.85% [10]. It would be safe to assume that future borrowings are likely to reflect similar conditions. This means that the Government would not just be paying back the loan amount, but also a significant amount of interest on top of it - adding to Sri Lanka’s already debilitating debt status. 

Those who wish to argue against the compact need to refer to the relevant documents and provide evidence if their case is to be taken seriously. At this stage, if the Government chooses not to sign the agreement prior to September 18th, it runs the risk of choosing to increase the national debt burden as well as delay essential development.  Such a choice should be based on sound reasoning and evidence. It shouldn’t be due to personality conflicts, absurd fear mongering or petty politics.

View this article in Sinhala here.


[1] Congressional Research Service (2018). Millennium Challenge Corporation.

[2] Wettasinghe, C (2019). ‘Sri Lanka at risk of losing US$480mn Millennium Challenge grant’. Economy Next [Online, accessed 30 Aug. 2019]

[3] Ibid

[4] Congressional Notification (2019). Millennium Challenge Corporation. April 25. [Online, accessed 30 Aug. 2019]

[5] Principles into Practice: Country Selectivity (2014). Millennium Challenge Corporation. [Online, accessed 30 Aug. 2019]

[6] Ministry of Finance, Sri Lanka (2019). Annual Report 2018. [Online, accessed 29 Aug. 2019]

[7] Ibid

[8] Ibid

[9] Wignaraja, G (2019). ‘Making the MCC Compact Work for Sri Lanka’. Lakshman Kadirgamar Institute. 16 August. [Online, accessed 30 Aug. 2019]

[10] Aneez, S & Fioretti, J (2019). ‘UPDATE 4-Sri Lanka raises $2.4 bln in dollar bond sale - term sheet’. Reuters. March 7. [Online, accessed 30 Aug. 2019]




Officially ‘upper-middle income’ - Now what?

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Aneetha Warusavitarana

Sri Lanka is now an upper-middle-income country, with a per capita gross national income (GNI) that surpasses that of regional competitors like Indonesia and Vietnam. The threshold for eligibility as an upper-middle-income country is a per capita GNI of $ 3,996, and as at July 2019, Sri Lanka crossed that threshold with a per capita GNI of $ 4,060. While this appears to be a positive development, it should be taken in context. The eligibility criteria to be classed as an upper-middle-income country begin at $ 3,996 per capita GNI; however, all countries within the range of $ 3,996-$ 12,375 per capita GNI are categorised as upper-middle income. It’s glaringly obvious that we just about made the cut, and if we are to see the kind of growth and economic prosperity associated with upper-middle-income countries, we have a long way to go.

Middle-income trap

The fear is that the growth required to push our per capita GNI up by roughly another $ 8,000 will be elusive – the notorious “middle-income trap” could possibly impede upward mobility and economic prosperity. As a country leaves its demographic dividend, economic growth tends to slow. The growth that is seen in most developing countries is created by the shifting of labour from low-productive employment like agriculture to more productive sectors such as manufacturing. However, this is not a source of long-term growth. As labour flows into manufacturing, real wages will rise and productivity gains will reduce. As a result, a developing country will be unable to compete internationally with labour-intensive manufacturing. Low-productivity also means that competing with higher value-added goods will also be challenging.

The World Bank’s case study of the Middle East and North Africa (MENA) region and the challenges they face have some parallels with the Sri Lankan situation. The World Bank highlights the damage caused to the economy by a social contract where the state is expected to provide jobs in government and hand out universal subsidies, in exchange for a lack of accountability. The result is that entrepreneurship and innovation are stifled, public service delivery is poor, and there is widespread mistrust of the government. In addition, considerable debt burdens are forcing governments to cut public spending, which has long been the main driver of growth in the region.

The situation in Sri Lanka is quite similar. While we are now an upper-middle-income country, the description of the public service in MENA regions is apt, and could very easily describe the government service in Sri Lanka. As each election cycle begins, the incumbent government doles out an additional few thousand jobs, while the opposition promises to give more jobs and better wages in the government sector if they are voted in. A rigid labour market, where innovation is not encouraged, and productivity is not rewarded is just one factor that is likely to hold us back.

Maneuvering the minefield

The general solution presented is that middle-income countries need to shift gears – policy decisions now need to be taken with the objective of moving into a high-income country classification. Focusing on innovation, a strong export base, and creating decent jobs are just a few policy solutions that are presented on the topic. While this is challenging, our newfound title is also an indicator of the potential in the country. With the right policies in place, there is a lot that can be achieved, and with presidential elections coming up, now is the ideal time to bring up this topic of policy reform.

While the middle-income trap is a pervasive problem in the region, there are success stories of countries that have “escaped” the trap. The Asian Development Bank (ADB) has identified some common economic factors that these success-story countries have in common. The four key factors identified are as follows: (i) the country had a rapid transition from agriculture to industry, (ii) higher export shares, (iii) lower inflation, and (iv) decreases in inequality and dependency ratios. The ADB has also found that when looking at the drivers of growth for upper-middle-income countries, total factor productivity should not be underestimated – in other words, education, research and innovation, and structural reforms are vital.

Realising potential

Transforming the Sri Lankan economy will require a drastic shift in mentality. As a small island nation of only 21 million people, we need to open our borders for free movement of labour, technology, and investment. Sri Lankans require a shift in mindset, where the gains of free trade and integration into global value chains are not summarily dismissed. The risks of these actions are often over-exaggerated, or given sole focus, feeding into a larger protectionist mindset.

The positive is that Sri Lanka now has an idea of the challenges that lie ahead, and key policy reforms which would set the stage for the kind of economic growth that we aspire for. The hurdle lies in implementation. With presidential elections coming up, there is scope and policy room for new reforms to be brought in, and ideally, these reforms should be tailored to achieve the four success-story characteristics – a shift away from agriculture, a focus on exports, low inflation, and decreases in inequality and dependency ratios.

The Millennium Challenge Corporation Compact Addressing constraints to growth

Originally published in Daily News

By Ravi Ratnasabapathy

On April 25, 2019, the board of the MCC (Millennium Challenge Corporation) approved a Sri Lanka Compact - a five-year, US $480 million grant. The grant seeks to assist the Government to address two of the country’s binding constraints to economic growth:

  1. inadequate transport logistics infrastructure and planning; and

  2. lack of access to land for agriculture, the services sector, and industrial investors.

Controversy has surrounded foreign loans taken by the government, which now faces difficulty in repaying them. The MCC compact, however, is a grant, so it does not need to be repaid which is a plus.

What does the MCC Compact involve?

The idea is to stimulate growth by addressing two critical areas that are constraining it. The two areas were identified by a study conducted by the Center for International Development at Harvard University. The study which took almost a year was conducted throughout 2016 and based on “Growth Diagnostics” a methodology developed by Ricardo Hausmann, Dani Rodrik and Andrés Velasco to determine the obstacles to a country’s capacity to grow.

“The main idea is that each country may be bumping against different potential constraints but each constellation of constraints must be giving off a different collection of symptoms or signals. By using Growth Diagnostics, policymakers can develop a clearer theory of change by designing policies that can take the country out of (or workaround) its current syndrome and relax its most binding constraints.” (Harvard CID)

High levels of government spending have helped drive growth over the past decade- services comprise 62% of GDP and are dominated by government spending. Manufacturing makes up only 29% of GDP and agriculture makes up the rest. It is not feasible to rely on government spending to drive growth any longer because:

  • Tax revenues are very weak (only 11.9% of GDP in 2018)

  • Budget deficits are high (5.3% of GDP in 2018) and

  • Debt is high (central government debt was 82.9% of GDP in 2018)

If government spending is to increase (eg: by hiring new people to the public service or embarking on infrastructure spending) it requires either increased tax revenues or increased debt. The current regime has increased taxes across the board (VAT, PAL, income tax etc.,) to try and increase government revenue. Naturally, this has proved highly unpopular. If tax revenues are not available the government can borrow and spend, but with debt levels already high this is not an option either. People must also understand that debt is not “free” money – it must be repaid-out of future taxes. In effect debt is simply taxation postponed - we can spend today but taxes must go up tomorrow to repay the debt.

Simply put, the current basis of growth, driven by public sector spending is not sustainable. Therefore new avenues of growth must be found.

A key driver of growth in successful East Asian economies was exports. It was also an important driver of Sri Lanka’s growth in the 1980s and 1990s. Exports of manufactured goods grew very rapidly, at around 20% annually between 1976 and 1984. Following the outbreak of the civil war, growth slowed drastically during the next five years, but then accelerated to an average rate of 16% between 1989 and 2000. Since then, however, growth stagnated and exports have declined in importance. As a % of GDP exports have fallen steadily from a high of 33.3% of GDP 2000 to about 12.7% of GDP in 2016.

Export growth

One of the problems to growth in exports faced by Sri Lanka is the lack of diversification. Exports grow not only because of volumes but also because new products being added to the basket. Between 2000-2015 Sri Lanka added just 7 new products (worth US$ 0.1bn) to its export basket. In contrast, Thailand added 70 new products (worth US$ 21.8bn) and Vietnam 48 (worth US$ 50.4bn).

The possibilities of exporting related products within Sri Lanka’s existing export basket seem exhausted so completely new sectors must be attracted, which is not easy.

Reinvigorating the export sector is thus a priority. Bringing in new investment (local and foreign) to export industries, particularly in new sectors can create a new path to growth. What is holding back investment? The Harvard study identified the following:

  1. policy uncertainty (especially tax and tariff policy);

  2. inadequate access to land; and

  3. poor transportation and logistics

The most important is policy uncertainty. As the study points out:

“policy uncertainty as it relates to taxes is characterized by an accumulation of contradictory announcements from various government officials on a range of taxes, including trade-related taxes….policy uncertainty is higher in Sri Lanka than in comparator countries and that investor optimism deteriorated as contradictory statements mounted.”

Unfortunately little can be done to address the policy uncertainty (the government needs to get its act in order) but the MCC grant addresses the other two.

As per the analysis:

“The potential new industries and services that will drive Sri Lanka’s future growth need high-quality industrial land with integrated infrastructure, including access to wastewater services, stable electricity supply and the ability to move goods reasonably quickly. Currently, such a combination (i) is hard to obtain in the congested Western province, (ii) is located in areas that are not sufficiently connected to other parts of the island, a fully-functioning port or airport, or people with adequate skills, or (iii) does not yet exist.”

Specifically with respect to land:

“Consultations with the private sector reveal that transaction costs to access industrial land are very high for domestic investors and foreign investors alike, but that domestic investors are advantaged by a more intimate knowledge of the system. The inability to secure land for planned investment activities has been the most common cause of investment plans being dropped or relocated to other countries in the last several years according to continuous consultations with the private sector by CID and government teams that it has worked alongside.”

A partial solution to this would be to develop industrial zones with adequate facilities. The country currently has 12 zones but most are already filled- itself is a testament to the problem. While more industrial zones will help, it does have the limitation that growth will tend to cluster in pockets around the zones, rather than being more widely spread.

Lack of transport infrastructure

The lack of transport infrastructure-critically access to the port and airport means that the majority of industries are crowded around the Western province.

“The Western Province also hosts the major logistics centres upon which other regions of the island are currently dependent in varying degrees. Consequently, the movement of goods and people within the province is increasingly problematic, imposing mounting costs and physical limitations on growth prospects in that part of the country. This, in turn, hurts the growth prospects for other regions to the extent that these regions depend upon access to logistic centres and markets concentrated in the Western Province.”

This leads to problems of congestion, high prices and uneven development, as other parts of the country get left behind. Building transport infrastructure to link up other parts of the country is therefore important.

“Connectivity concerns are also relevant in other regions of the country. The current state of transport infrastructure generally frustrates the development of inter-regional economic activity and arguably the suitability of locating investments outside the western region and near other concentrations of the population on the island. Economic development in other regions would help reduce the constraints that congestion (as it affects travel time costs, labour availability, and access to land) imposes upon growth in the western region as well as promote more inclusive and geographically widespread growth.”

It is also important to try and ease the congestion within the Western province by the efficient provision of public transport and improved traffic management. “Problems associated with congestion are expected to worsen with a high degree of certainty. Daily average road speeds in Sri Lanka (Colombo District) are estimated to decrease from 26 km/hour to 19 km/hour (22 km/hour to 14 km/hour) between 2011 and 2031. Peak hour speeds are forecast to be as low as 11 km/hour and 9 km/hour in Sri Lanka and Colombo District, respectively.”

The concept of evidence-based policymaking is unknown in Sri Lanka. Interventions are made overnight by politicians succumbing to pressure from special interest groups or their own whims and fancies. The MCC Compact is a result of careful analysis and addresses some important issues. The detailed studies on which it is based are available on the Harvard CID and MCC websites. It would be a pity if this were to fall victim to uninformed fear-mongering and petty politics.

On social media, Sri Lanka should consider aligning its actions with the Christchurch Call

Originally published in Daily FT

By Prof. Rohan Samarajiva

Since the tragic terrorist incidents and pogroms of April and May, concerns about social media have been reverberating throughout our society. We are under pressure to “do something,” even without fully understanding the problems we seek to solve and the viable solutions.

Understanding social media 

The term “social media” is not the most illuminating. Facebook differs from Twitter and both are very different from TikTok. All these are platforms (that allow for users and producers to connect) and all depend on user-generated content: content generated by millions of users with no chokepoints conducive to regulation (otherwise known as editors, producers and media owners). But beyond that, the affordances of each are very different. 

There were 2.4 billion active users on Facebook by 2019 Q2, but none of the millions of content producers can gain the attention of all 2.4 billion people. Attention is a finite, valuable resource and the design of the platform requires work to be done to gain attention. Some fail, while others reach audiences in the lakhs and millions. 

How does one attract attention? Humans are genetically programmed to pay attention to signs of danger and opportunities of procreation. So in general, those who seek to assemble large and engaged audiences tend to emphasise attention-gaining content that leverage violence and titillation. Those who seek to maximise audiences for political purposes tend to purvey polarising content based on fear. Mainstream media do this too, but the new platforms do it better, mobilising the ingenuity of the crowd and data.

Selling aggregated attention to advertisers is how platform companies dealing in content make money. So their algorithms and design are optimised for attention gaining and holding.

What bad guys do

Yuval Noah Harari likens terrorists to a fly that wishes to destroy a china shop. The fly cannot budge even a single cup. Instead it gets inside the ear of a nearby bull and starts buzzing. The bull goes wild with fear and anger and destroys the china shop. What role is played by media in the buzzing? 

After the coordinated bomb attacks on 21 April (the enraging of the bull), social media is seen as having played a role in the enraging of the bull which took the form of pogroms against Muslim citizens. Some have claimed that the three blockages of social media by the telecom regulator on orders of the President were necessary to prevent violence, which does not fully explain what happened in the North Western Province and the Gampaha District on 13 May and the resulting harm to our multi-ethnic society (the damage to the china shop). 

But first, terrorists (the fly) have to recruit and raise money. Zahran used YouTube to recruit, and Facebook to draw attention to the video clips. The terrorists used Threema, an encrypted messaging service, to coordinate their activities. It was also reported that important discussions occurred face-to-face, including at a wedding on the east coast attended by the Colombo murderers, and after Friday prayers in a BMW car belonging to the financiers.

Complaints had been made prior to the attack about the Facebook pages and YouTube videos. In some cases, the authorities had declined to takedown pages so they could continue to gather 

information.

What can we do? 

Would the events of 13 May have happened if not for social media? As shown by the Divaina newspaper in the case of Dr. Shafi Shihabdeen, mainstream media, though in decline, can still aggravate the rage of the bull and cause significant damage. When some Facebook groups are larger than the circulation of most newspapers, one cannot ignore the potential of social media to amplify violence-inciting messages.

Many who want something done about social media disregard the culpability of the old ways of transmitting hate. The enraging of the bull by the LTTE’s killing 13 soldiers in the north in 1983 caused immense and lasting damage to Sri Lanka. No social media or mobile phones existed at that time. 

So it is necessary to ensure that all laws criminalising incitement to violence are technology neutral. And even more importantly, that cases against those violating such laws are expeditiously concluded and that punishments are well publicised. Exemplary punishment is what will deter future hate speech, not the length of prison sentences in unenforced penal provisions.

Laws cannot solve all problems.

What is the objective: is it to punish miscreants or is it to prevent conflagration? If the latter, the solution must give priority to prompt takedown of the incendiary content. That means steering clear of state action under law.

In all law-governed countries, penal actions are preceded by some form of legal and quasi-judicial proceeding wherein the state presents an indictment; the affected party is given an opportunity to defend him or herself; and an “unbiased” authority makes a decision. As a result, state action resulting in a takedown or other punishment will necessarily take a few weeks at least. By that time, the damage will have been done.

Thus, the best way to avoid violence resulting from terror attacks is cooperation with non-state parties who can takedown offensive content promptly based on community standards that are part of the terms of service. This requires continuing dialogue between state authorities and platform companies, with the participation of civil society groups who can assist in shaping appropriate community standards that can be applied by platform companies.

Preventing the recurrence of attacks such as those on 21 April is even more complex. As Muslim organisations which complained against the hate speech of Zahran were told, investigators sometimes need the content to be kept up in order to identify potential terrorists and to unravel their networks. These trade-offs are best made by those engaged in investigating terrorism and extremism, rather than dealt with through legislation. Of course, actions such the takedown of violent videos by YouTube and the tweaking of its recommendation algorithms must be continued.

The Christchurch Call, an initiative led by the Governments of France and New Zealand, which has been joined by countries such as India and Indonesia as well as by the major platform companies such as Facebook and Google, presents a law-governed framework for acting on social media that preserves core democratic values including the freedom of speech. Sri Lanka should seriously consider aligning its actions with the Christchurch Call, rather than hurriedly “doing something” that could do more harm than good.


Rohan Samarajiva is founding Chair of LIRNEasia, an ICT policy and regulation think tank active across emerging Asia and the Pacific. He was CEO from 2004 to 2012. He is also an advisor to the Advocata Institute.

Why nationalisation signals ‘The End’ of the film industry

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Aneetha Warusavitarana

Now that film distribution has been nationalised, Sri Lankan consumers may have to bid farewell to their beloved Marvel, DC, and Disney movies. All rights to film distribution are now vested solely with the government-owned National Film Corporation (NFC). The reality will be that consumers and cinema hall owners will suffer. While we consumers will now have to wait until the latest Marvel movie passes through this new bureaucracy to watch it, cinema hall owners will lose almost all decision-making power regarding which film they wish to screen, when they wish to screen, and for how long they wish to screen.

Looking at the “Methodology for Distribution and Screening of Films” of the NFC, the system for importing films is now as follows: “Registered importers should obtain the written approval of the Chairman of the Corporation (hereinafter referred to as ‘Chairman’), fulfilling all conditions as per the importation policy issued by the Corporation to be followed before (the) importation of films.”

Once the registered importer obtains the written approval of the Chairman of the NFC and imports the film, the film has to be handed over to the NFC. The NFC will then submit the film for approval to the Public Performance Board and if the Board issues the certificate, the NFC will distribute the film. In other words, written permission from the Government is required before a film is imported into the country, and once the film is imported, it is handed over entirely to the Government for approval until the point of screening.

It is no wonder there are fears that these businesses will not be able to remain profitable under such restrictions. Now that a second wave of nationalisation has hit film distribution in the country, it would be wise to take a step back and look at what happened the last time distribution was in the hands of the government.

Back to the 70s

In 1971, the then government stepped in and centralised all film distribution under the NFC. The result was the performance of the industry declining, as highlighted in the 1997 Senaka Bandaranayake committee report. To extract a few key points from the report, with the NFC having a complete monopoly over the distribution of films, the quality of films that were screened dropped. Even though cinema halls were empty – a reflection of movie quality – cinema halls had to continue screening. The drop in attendance and poor return on investment meant that there was a resultant deterioration in the quality of cinema halls and overall viewing experience. Inefficiencies in the NFC created a substantial distribution backlog of nearly 100 nationally produced films that were waiting to be screened. The report also notes that major foreign studios were not interested in working with a country where the government had a monopoly over film distribution, and as such, the NFC was unable to import high-quality films which would attract audiences and bring in revenue.

Prior to the nationalisation of distribution, the government was already a player in the industry – and when looking at the most basic mandate of the government, this should not be the case. Given that film distribution is a part of the entertainment industry, and is not an essential service, the role of the government is clearer – it should step out and limit its influence to that of a regulator. An argument that drives this second wave of nationalisation is that we need to promote locally produced films. While fostering local talent is not in itself a questionable objective, it will not be achieved through the nationalisation of film distribution. When the NFC last had sole distribution rights, it is difficult to say that there was a positive impact on the local film production industry. The backlog of locally produced films to be screened and empty cinema halls are not indicators of a thriving local production industry.

If the government is truly interested in local film production, then investment should be directed there – centralising the distribution of films removes competition, lowers standards, and does not create an environment where local film production will thrive.

Growth under private distribution

The takeaways from the report are clear – in the past, having the NFC as the sole distributor of films was detrimental to the industry. The growth that the industry has seen since then further exemplifies this point. When distribution was opened up in 2001 and four private film distribution circuits entered the market in addition to the NFC, there were approximately 137 screens running. Based on conversations with the industry, this number has now risen to over 200 under private film distribution. The increase in the number of screens is indicative of the investment that poured in once private distribution was allowed. Private investment will not pour into an ineffective business model – once private distribution was allowed, these circuits re-established good relationships with international production houses, and were able to import films that would draw audiences and generate revenue.

What are the consequences?

Film Infographic.png

Given that these conversations have been taking place since last year, it is unfortunate that the result was the nationalisation of distribution. The industry is likely to be hit hard. Nationalising film distribution means that cinema halls will be able to screen a movie only once it has navigated the minefield of regulations, corruption, and general confusion that is the government – in other words, long after the movie premieres internationally. They will then only be able to screen this movie on dates dictated by the NFC, and for a time period also dictated by the NFC. The issues that crippled the industry post 1971 are likely to resurface.

In a context where the cinema industry has to face competition from movie piracy and online streaming services, releasing movies as they premier internationally and re-inventing the experience of watching a movie in a cinema is vital. The chances are that local cinema businesses will suffer as a result of this decision.

As consumers, we will not be better off – no one wants to wait a few months, run the risk of seeing multiple spoilers online, and miss fandom conversations just for the experience of watching it at the cinema. If the movie were to premier at the same time it premiers internationally, there would be no question about it. It’s also important to reiterate that the country faced a growth in cinema halls once distribution opened up – private distribution led to a clear increase in investment and growth, and it is regrettable that we have taken a step backwards.

පීරියඩ්ස් වලට ( ඔසප් වීමට ) බදු ගහන ආණ්ඩු

අනුකි ප්‍රේමචන්ද්‍ර 

කාන්තවන්ගේ ඔසප් වීමට සාමාන්‍යයෙන් කියන්නෙ පීරියඩ්ස් කියල. 

කාන්තාවන්ගේ සාමාන්‍ය පීරියඩ්ස් වලට අසාමාන්‍ය බදු ගැසීමට සහ ඔසප් වීම පිළිබඳ ඇති මිත්‍යා මතවලට එරෙහිව නැගිටිය යුතු කාලයයි. 

ඔබ බොහෝවිට මේ ගැන නොදන්නවා වෙන්නට පුලුවන්. ශ්‍රී ලංකාවේ ඔසප් වීම පිළිබඳව සහ ඔසප් සනීපාරක්ෂාව පිළිබඳව සමාජයේ ඇති කතිකාවත එටරම්ම ගැම්බුරු නැහැ. එමනිසා සමහර විට ශ්‍රී ලාංකාවේ කාන්තාවන්ට ඔසප් වෙනවාද යන තරමටම අපේ සමාජ කතිකාවත ප්‍රාථමිකයි.  ඇත්තටම කතාව තමයි ශ්‍රී ලංකාවේ කාන්තවන්ගේ ඔසප් සනීපාර්ක්ෂාව ඉතාම දුර්වලයි. ඔසප් වීම සහ ඔසප් සනීපාර්ක්ෂාව පිළිබඳ අධ්‍යාපනය අඩු වීම, සමාජයේ ඔසප් වීම පිළිබඳ තිබෙන මිථ්‍යා මත වගේම විවෘතව මේ මාතෘකාව කථා කිරීමට බිය වීමම දුර්වල ඔසප් සනීපාක්ෂව ඇති වීමට හේතු කිහිපයක්. 

දුර්වල ඔසප් සනීපාරක්ෂාව නිසා බොහෝ ශ්‍රී ලාංකික කාන්තාවන් අනෙක් රටවල් වල කාන්තාවන්ට වඩා සිටින්නේ පිටුපසින්. 

ශ්‍රී ලංකාවේ සනීපාර්ක්ෂකතුවා භාවිතය සලකන්නේ සුභෝගභෝගී භාණ්ඩයක් විදියටයි. එහෙමත් නැත්තම් කලු වෙළඳපොලේ විකිනෙන භාණ්ඩයක් ලෙසටයි. 

ශ්‍රී ලංකාව තුල සනීපාරක්ෂක තුවා සහ කාන්තා සනීපාරක්ෂාව පිළිබඳ මිත්‍යා මත සහ සමාජ පීඩනය නිසා දිනපතාම සනීපාර්ක්ෂාව අතින් අපි අත්ත දුප්පත් තත්වයට පත්වෙමින් තිබෙනවා. 

ඔසප් සනීපාර්ක්ෂාවෙන් දුගීවීම 

ඔසප් සනීපාර්ක්ෂාවෙන් දුගීවීම කියන්නෙ කාන්තාවන්ගේ සනීපාර්ක්ෂාවට වියදම් කිරීම මිල අධික වීම සහ එම වියදම් දරා ගැනීමට අපහසු වීමයි. 

ශ්‍රී ලංකාව මෙම ප්‍රශ්ණයට තදින්ම මුහුණ දෙන රටක්. සාමාන්‍යයෙන් වෙළඳපොලේ සනීපාර්ක්ෂක තුවා විකිනෙන්නේ රු. 120 - 175 ත් අතර මිලකටයි. ආනයනය කරන වෙළඳ නාම රු. 350 දක්වා මිලකටයි අලෙවි කරන්නේ. එම නිසා  ආනයනික සනීපාරක්ෂක තුවා මිලදී ගැනීම කාන්තවන්ට සිහිනයක් පමණක් මෙන්ම එය සුපෝගභෝගී භාණ්ඩයක් බවට පත් කර තීබෙනවා. 

ආනයනික සනීපාරක්ෂක තුවා එතරම් මිල අධික වීමට ප්‍රධාන හේතුව රජය අයකරන අසීමාන්තික සහ අසාධාරණ බදු ප්‍රමානයයි.  

2018 සැප්තැම්බර් මාසයේ සනීපාරක්ෂක තුවා සඳහා අය කරන මුලු බදු ප්‍රමාණය 102% සිට 62% දක්වා මුදල් අමාත්‍යතුමා අඩු කරනු ලැබුවේ එවකට පැවති සෙස් බද්ධ ඉවත් කිරීමෙන්. මෑතකදී මුදල් අමාත්‍ය මංගල සමරවීර මැතිතුමා රොයිටර් පුවත් සේවයට ප්‍රකාශ කර තිබුනේ පාසල් දැරියන්ගේ සහ කාන්තාවන් ආර්ථිකයට එකතු කර ගැනීමට කාන්තා සනීපාරක්ෂාවට පනවා ඇති ඉතිරි බදු ප්‍රමාණයත් ඉවත් කරන බවයි. 

සාමාන්‍යයෙන් කාන්තාවක් තම ජීවිත කාලය තුල දින 2535 ආර්තව කාල නැතහොත් ඔසප් කාල ගත කරනු ලබනවා. එක්වර බැලූ බැල්මට එය එතරම් දීර්ඝ කාලයෙක් ලෙස නොපෙනුනත් එය වසර හතක පමණ දීර්ඝ කාලයක්. කාන්තවකට ඉතා අවම සනීපාර්ක්ෂක තත්ව යටතේ ඔසප් කාල වලදී සනීපාරක්ෂකතුවා වල මිල අධික වීම නිසා රෙදි කඩවල් භාවිතයට තල්ලු කිරීම සාධාරණ යැයි ඔබ සිතනවාද? 

සනීපාරක්ෂක තුවා සුපෝගභෝගී භාණ්ඩයක් බවට පත්වීම ඉතාම කණගාටුදායක තත්වයක්. මිලෙන් වැඩි අත් ඔරලෝසු සහ සුවඳ විලවුන් සුපෝගභෝගී භාණ්ඩ ලෙස සැලකෙන්නේ එම භාණ්ඩ සමාජයේ ඉහළ ආදායමක් උපයන පිරිසට පමණක් මිලදී ගත හැකි නිසයි. පවතින බදු ක්‍රමය දැන් සනීපාරක්ෂක තුවා සුපෝගභෝගී භාණ්ඩයක් බවට පත් කර තිබෙනවා. 

මෙම වසරේ කාන්තාවන්ගේ ඔසප් සනීපාරක්ෂාව පිළිබඳ ජාත්‍යන්තර දිනයේ තේමාව "ඔසප් වීම කාන්තවාට බලපායි" යන්නයි. පසුගිය සතියක ප්‍රසිද්ධ ඉරිදා පුවත්පතක පල කර තිබුනේ නාගරීකරණය වීම සමඟ දැන් "නවීන" කාන්ථාවන් මහදවල් සුපිරි වෙළඳසැල් වලින් සනීපාරක්ෂක තුවා මිළඳී ගන්නා බවයි. එම පුවත් පත් වාර්ථාවට අනුව කලින් කාන්තාවන් සනීපාරක්ෂක තුවා මිලදී ගත්තේ ඉතාම රහසිගතව සහ බ්‍රවුන් පේපර් කවරයකින් එතීමෙන් අනතුරුවයි. එයින් තහවුරු වන කාරණයනම් තවමත් සනීපාරක්ෂකතුවා විවෘතව මිලදී ගැනීම අනුමත නොකරන බවයි.

අවාසනාවට කරුණ නම් අපි පිළිගැනීමට අකමැති වුවත් ලිපියේ කතෘ දරණ මතයම සමාජයේ තවත් බොහෝ දෙනා දැරීමයි. මම පසුගිය දිනක නුවර සිට නැවත කොළඹ පැමිණෙන අතර මඟ සාමාන්‍ය සිල්ලර කඩයෙකින් සනීපාර්ක්ෂක තුවායක් මිලදී ගත්විට කඩයේ මුදලාලි මෙම සනීපාක්ෂක තුවාය කඩදාසි ගණාවකින් ඔතා ඉතාම රහසිගත ලබාදුන්නේ හරියට මම ඔසප්  කාලයක් පසුකිරීම මහා අපරාධයක් ලෙස සලකමිනුයි.ඔසප්භාවය ගැන කථාකරන විට සමහරු සංස්කෘතියට බනිනවා. සමහරු සමායයේ තිබෙන මිථ්‍යා මතවලට දොක් නගනවා. නමුත් අවසාන ප්‍රතිථලය මිලියන 10.5 තරම් කාන්තාවන් ආර්ථව චක්‍ර දිළිඳුභාවයට පත්වීමයි. 

ඔසප්  චක්‍ර පිළිබඳව ගැරහීම ආර්ථව දිළිඳුබව ඇති කරන්නේ කොහොමද? 

සනීපාර්ක්ෂක තුවා සැඟවමින් විකුනන මේ සෙල්ලම ඔසප්  චක්‍ර පිළිබඳව වැරදි මත ගණනාවක් සමාජගත කරනවා. හරියට කාන්තාව මත් කුඩු මිලදී ගන්න තත්වයට සනීපාරක්ෂක තුවායක් මිලඳී ගැනීම සමාන කරනවා. කාන්තාවකට මෙතරම් අත්‍යාවශ්‍ය භාණ්ඩයක් කලු කඩයේ විකුණන තත්වයට සමාජයේ ඇති කුමන හෙතුවක් පත් කලත් එහි අවසාන ප්‍රතිඵලය වෙන්නේ කාන්තාවන් සනීපාරක්ෂක තුවා මිලඳී ගැනීමට භය වීම සහ අධෛර්‍යට පත් වීමයි. සනීපාර්ක්ෂක තුවා පිළිබඳ සමාජයේ ඇති දුර්මතවල කොතරම් බරපතලද කියනවනම් වෙළදසැල් වල මෙය විකුනන්නේ සඟවාගෙනයි. එයම හේතුවක් වෙනවා කන්තවන් එම සනීපාර්ක්ෂක තුවා වල මිල, ප්‍රමතිය පිළිබඳ විවෘතව කථා නොකිරීමට. ඕනෑම මාතෘකාවක් සඟවා කතාකිරීමෙන් මෙවැනි තත්වයක් ඇතිවීම වැලැක්විය නොහැකියි. අපි ඇකමැති සනීපාරක්ෂක තුවා සන්නාම අපිට අකමත්තෙන් වැඩි මිලකට, අඩු විවිදත්වයක් සහිතව ගැනීමට සිදුවීම මෙහි අවසන් ප්‍රතිඵලයයි. 

ශ්‍රී ලංකාවේ සනීපාරක්ෂක තුවා වෙළඳපොළ දේශීය වශයෙන් නිපදවන සන්නාම කිහිපයක් මඟින් අත්පත් කරගෙන තිබෙනවා. එම දේශීය වෙළඳනාම වලට ආර්ක්ෂාව සැපයීම සඳහා ආනයනික සනීපාරක්ෂක තුවා සඳහා ඉතා ඉහල ආනයනික බද්දක් අය කරනවා. අපගේ අසල්වැසි ඉන්දියාව සමඟ සැසඳීමෙදී අපගේ රටේ විකිණෙන සනීපාරක්ෂක තුවා වල විවිධත්වය ඉතාම අවමයි. එක් එක් කාන්ත්වාට අවශ්‍යා සනීපාරක්ෂක තුවා වර්ග එකිනෙකට වෙනස්. එය තීරණය වන්නේ එම කාත්වාගේ කායික සොභාවය සහ ලක්ෂණ අනුවයි. 

සනීපාරක්ෂකතුවා කලු වෙළඳපොළේ විකිනෙණ භාණ්ඩයක් ලෙස සැලකෙන නිසා ලෝකයේ අනිත් වෙළඳපොලවල් වල දක්නට ලැබෙන නැවත සේදිය හැකි සනීපාරක්ෂක තුවා, කාබනික කපු වලින් නිපදවෙන සනීපාරක්ෂකතුවා, නැවත භාවිතාකලහැකි සනීපාරක්ෂක තුවා ලෙස ඇති විවිධ නිෂ්පාධන  කාණ්ඩ දැක ගැනීමට නොහැකියි. අපිට උදාවී තිබෙන තත්වය තමයි අපිට නොගැලපෙන, අපි ඇකමැති සනීපාරක්ෂක තුවා වැඩි මිලකට මිලට ගැනීම. මේ පිළිබඳව හඩක් නගන්නටවත් කවුරුවත් එක්නොවෙන තරමට සමාජ මතය සනීපාරක්ෂතතුවා මහා රහසිගත කලුකඩ භාන්ඩයක් කර හමාරයි. 

නැහැ, ඔබ මිලදීගන්නා සනීපාරක්ෂක තුවා පැකැට්ටුව කොලවලින් ඔතා ලබාගැනීමට තරම් රහසිගත සහ භයානක මත්කුඩු වර්ගයක් නොවෙයි.

නැහැ, අසීමිත ලෙස බදු ගසා සමාජයේ කිහිපදෙනෙකුට පමණක් මිලදී ගැනීමට හැකිවන ලෙස ඉතා ඉහල මිලකට අලෙවි කලයුතු භාණ්ඩයක් නොවේ සනීපාරක්ෂකතුවා.

කාන්තාවක් විදියට මම ඔබෙන් කාරුණිකව ආයාචනා කරන්වා කාන්තවනේ ඔසප් වීම පිළිබඳ විවෘත සංවාදයකට එකතුවන්න කියල. සමාජයේ ඔසප් වීම පිළිබඳ දුර්මත සහ විකාර මත වෙනස් කරන්න අපි එකතු වෙමු. සනීපාරක්ෂක තුවා සුපෝගභෝගී භාණ්ඩයක් නොවෙයි. ඔසප් වීම සාමාන්‍ය ජීව ක්‍රියාවලියක් වෙද්දි සනීපාරක්ෂක තුවා සුපෝගභෝගී කිරීම හරිම අසාධාරණ නැද්ද?

View this article in English here.

Why aren’t our millennials at work?

Originally published in Daily FT and Republic Next

By Nishtha Chadha

Today is International Youth Day; a day described as the United Nations as the “annual celebration of the role of young women and men as essential partners in change”. Everyday, we see young people across the globe emanating entrepreneurial drive and catalysing positive growth. ‘Millennials’ have become the symbol of a new world order, based on innovation and large-scale mutual exchange.

How do we create jobs that young people feel dignified doing? 

Yet, here in Sri Lanka, we see a very different story. Rather than catalysing growth, many of Sri Lanka’s talented youth languish in unemployment. Popular rhetoric often defines these young people as ‘lazy’ and ‘ungrateful’, unwilling to fill blue collar vacancies with low social repertoire and climb the ever-elusive career ‘ladder’. But with issues of unemployment pervading the youth demographic for over four decades now, despite having the highest literacy rate in the region, perhaps it is time for a new conversation. How do we create jobs that young people feel dignified doing?

Educated young people make up a third of Sri Lanka’s unemployed, while over 30% of the county’s total informal workers belong to the youth demographic. Often these numbers are attributed to the infamous ‘job-skill gap’, where tertiary-educated youth are left unequipped to acquire private sector vacancies, but over-educated to fill opportunities in labour-intensive industries. However, this hypothesis also ignores an entire socio-cultural dimension that underscores many young people’s unwillingness to settle for in-demand blue collar careers. 

According to the Department of Census and Statistics [DCS] (2017), the most difficult vacancies to fill in the job market were as follows:

  1. Sewing Machine Operators

  2. Security Guards

  3. Commercial and Sales Representatives

  4. Other Manufacturing Labourers

  5. Cleaners and Helpers in Offices, Hotels and Other Establishments

When one reviews this data it is hardly surprising that after spending 16 years in education, young people are unwilling to forego their intellectual capital and fill these vacancies. Instead, many wait in line for public sector opportunities, characterised by high social status, lifetime employment and funded by taxpayer money. The government often uses this as a vote-securing scheme, having offered 16,000 graduate roles just last month in preparation for the forthcoming election. But with an already inflated public sector, slowing growth rates and a growing toll of non-contributory pensions, this strategy has become both unsustainable and unreliable. 

Closing the gap

DCS data suggests that only 7.2% of private sector vacancies are in high-skill occupations.

While the private sector does account for the majority share of youth employment, DCS data suggests that only 7.2% of private sector vacancies are in high-skill occupations. Slow job creation has become a persistent characteristic of the Sri Lankan economy, with highly restrictive employment protection legislation and skewed bargaining power of trade unions significantly raising labour costs and impeding job creation.

Roughly 1.5 million Sri Lankans migrate internationally for work

As a result, roughly 1.5 million Sri Lankans migrate internationally for work (approximately one fifth of the domestic workforce). Over 40% of these migrants belong to the “skilled” labour category, suggesting a worrying trend of missed opportunity. Certainly, the fact that home-grown skilled labour has no place in a growing upper-middle economy is a cause for serious concern in itself.

As Sri Lanka faces up to the growing challenge of an ageing population, the country needs to create more and better jobs to sustain growth and make optimal use of its working-age population. This suggests an urgent need for structural reforms to increase competitiveness and openness to FDI, which will create more productive and higher-paying jobs as foreign firms bring in new technology and better management practices to the Sri Lankan market. Trade liberalisation can also play a critical role in producing large-scale opportunities for educated workers, particularly by plugging into regional and global supply chains. Indeed, with the right reforms in place, active engagement with foreign economies could present unparalleled opportunity to kickstart high-quality job creation in Sri Lanka and give many unemployed skilled graduates the opportunity to pursue fulfilling careers that positively contribute to the national economy. 

Moreover, as the global economy shifts increasingly towards services, personal consumption and trade in digital goods, there needs to be a concerted effort towards promoting innovation and entrepreneurship amongst the youth population and moving people away from traditional public sector careers. Sri Lankan investment in research and development (R&D) only amounts 0.07 percent of total Government expenditure (2017). As such, there is a pressing need to improve public and private funding of R&D, whilst simultaneously addressing the current fragmentation of R&D institutions, in order to create tangible outcomes within the innovation space. Improving the intellectual property rights regime and creating an ecosystem of early-stage finance and incubation facilities will be instrumental in mobilising young people and facilitating entrepreneurial growth. 

Entrepreneurship and opening up

Growing entrepreneurship can not only transition Sri Lanka into a more innovative and complex economy, but simultaneously create a broad range of high-quality jobs in a variety of competitive industries across domestic and international markets. Small nations such as Israel and Singapore have shown the scale of returns that investment into innovation can provide, attracting Silicon Valley’s largest players to set up incubators and accelerators in their countries. Indeed, at the heart of both nations’ technological success has been the cultivation of a targeted public-private ecosystem for innovation, as well as an absolute openness to diverse participation.

If Sri Lanka is to make the most of its youth potential, it needs to reform the very fabric of its workforce. Promotion of unconventional career paths and greater cooperation between the public and private sectors are a must. Current barriers to foreign participation must also be removed. Diversity of thought and exchange of ideas have been proven as key drivers of innovation, and these need to be promoted through people-friendly policies and the removal of burdensome mobility and investment regulations. Sri Lanka’s youth need to be given opportunities to access foreign capital and learn from global leaders in entrepreneurship if they are to form the basis of a new Sri Lankan economy. 

Moreover, by opening up migration policies and flows of labour, Sri Lanka will be able to fill its wealth of low-skill vacancies that currently plague the private sector, without foregoing its local talent. India has been enjoying the fruits of an open border policy with Nepal for over half a century, producing a mutually beneficial arrangement for both parties. Resisting globalisation is merely slowing productivity and resigning educated Sri Lankan youth to careers that they do not feel dignified doing. Youth potential should be harnessed to translate into economic growth and productivity, not heavier burdens on an already struggling economy. 

So, this International Youth Day, let’s have a new conversation about young people. Let’s remove the weight of heavy expectations, and replace it with rigorous strategies for empowerment. Young people are the future of the Sri Lankan economy – so what are we doing to help them shape it?

Is the Government responsible for graduates’ jobs?

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Dilshani N. Ranawaka

“We want jobs!” is the latest addition to the long list of to-dos that Sri Lankans think the Government is responsible for. The Government positively responded to the protesters and appointed 16,800 graduates as trainee development officers and positioned them across the country. What is so preposterous about this incident? Is it graduates demanding jobs or the Government handing out jobs on a silver platter?

To put this into context, these fresh graduates demanding jobs are the smallest proportion of the student population who were privileged enough to get free education for nearly 20 years while the others were limited to just 13 years. The Government bears the cost of their education in addition to the scholarships offered as financial assistance for undergraduates in need. After 23-24 years of education, they are groomed to be graduates equipped with knowledge and the knowhow to enter the world or work. But, why are they demanding jobs?

This particular problem needs to be explored through the larger lens of unemployment in the country. At the end of the first quarter in 2019, the unemployment rate rose up to 4.7%, an increase of 0.3% from last year. Unfortunately, the contribution by the unemployed graduates to the national unemployment rate is nearly 10%. Reasons for such unemployment rates can be explained through two dimensions; from the perspectives of labour supply and demand.

Labour demand theories indicate that unemployment rates persist for two reasons; demand deficiencies and structural mismatches. Demand deficiencies occur when the economy does not produce sufficient employment opportunities and structural mismatches occur when the skills of the labour force do not meet the requirements of labour demand. In Sri Lanka, studies indicate that structural mismatches are the main contribution to unemployment. But how does it explain today’s prevailing conditions of the labour market?

Entering the world of work is challenging for any graduate. The problem arises when your hard-earned bachelor’s knowledge is impractical and is rarely helpful in the related work you are hoping to do. This is the problem of mismatches of skills in the labour market. In cases where technical knowledge is not important, employees would actually prefer interns for two reasons. Graduates demand more money because of their educational qualifications and interns could be trained to suit the institution’s needs at a lower cost.

In some cases, labour without a degree could have more experience in the field even though they might not have academics. In most cases, experience in a particular field is attractive to any employer.

Now, this takes us back to the main problem. Do these graduates have the right to demand for jobs from the Government?

As a fresh graduate myself, I believe we “do” have the right to work, but the State is not necessarily bound to provide graduates with jobs. These protestors who were provided free education for nearly 20 years should be the drivers of the economy. Unfortunately, such expectations are reversed in the context of Sri Lanka. What should the State’s stance be on such occasions to prevent this from happening in the future?

The present Government responded by offering positions of development officers and teachers funded by the State. This particular stance of the Government is problematic for two reasons.

This sets a bad precedent for younger generations, giving the impression that it is the Government’s responsibility to provide jobs for them. This removes any incentive for future unemployed state graduates to be creative, think outside the box, and achieve the potential they are capable of. Instead, they would be forever dependent on the State, demanding more of everything.

Increasing job opportunities expands the public sector. Larger states would result in higher expenditures and these expenditures are financed mainly through taxes and loans. When these protesters are given jobs, the Government needs to finance these expenses through the imposition of taxes; increasing the cost of living for everyone.

Given these positions, what should the State’s role be in addressing the problem? And what should the graduates expect from the State?

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Handing out jobs has so far been the strategy of governments. However, one could question if such quick fixes are effective even in the short term. A more productive approach would be to identify and implement strategies which address the question of “why” unemployment among graduates is common.
The European Union (EU) had identified two approaches to address structural mismatches within a labour market.

Addressing skills mismatch among unemployed

“Springboard” is an instrument implemented by Ireland which focuses on empowering the unemployed with skills. After offering the unemployed graduates six months of training, direct links with the labour market increases their chances of employment. A few of the key features of this instrument is that this mechanism is monitored by an “expert group on future skills needs”, a board that comprises employers, and focuses on training skills which are customised to suit the skills required for Ireland labour market dynamics and sectors such as ICT, finance, trade, and manufacturing.

Addressing skills mismatch to prevent unemployment

The “curriculum teams” initiated in Luxembourg acts as the bridge between labour market requirements and education institutions. Their role is to shape the national education curriculum in a manner to suit future labour market trends. The key takeaway from these policy instruments is the focus on addressing the core of the unemployment problem – “skills mismatch”.

This particular incident is one demonstration of a deep-rooted issue within the country; the free-rider mindset within each and every one of us. Moving from “it’s the government’s responsibility to do so” to “it’s up to the individual” is going to be extremely difficult as expectations of welfare from the government have been deep-rooted within our system. Which option would really empower an individual? Providing jobs or providing skills to strengthen and expand their capabilities?

Countering The Threats To Sri Lanka’s Democracy

Originally published by Echelon; reappeared in FNF South Asia

By Ravi Ratnasabapathy

Can There Be Democracy Without Democrats?

Democracy is an unusual form of government. Throughout much of history, humanity has been ruled by monarchs or warlords who reigned through the power of the sword. It is the only system of government where citizens are actively involved in their own governance; they do not just passively accept the dicta of a ruler. The system rests on some counter-intuitive assumptions: that a government will choose not to use its power to stay in control; that politicians and officials accept that they don’t have a right to rule – only that they may temporarily exercise authority on behalf of people.

This conflict with the instinctive desire to hold and perpetuate power probably explains its rarity; the Democracy Index rates only 20 countries (of 167) as ‘Full Democracies’ (a further 55, including Sri Lanka, are classified as ‘Flawed Democracies’). This is also why it is inherently fragile.

History has demonstrated that, without constant vigilance, it is easily overwhelmed. Almost exactly a century ago, in 1919, amid much hope, Germany became a republic, adopting a liberal constitution. But by 1933, as a result of political intrigue surrounding Germany’s ageing conservative president, Paul von Hindenburg, Hitler was appointed as Reich chancellor, legally and constitutionally.

“Many people in Germany thought that Hitler would be a typical head of government. Some, like the conservative politician Franz von Papen and the leaders of the German National People’s Party thought that they’d be able to control him because they were more experienced and formed the majority in the coalition government that Hitler headed. Others thought that the responsibilities of the office would tame and steer him in a more conventional direction. They were all wrong.

Hitler won mass support between 1928 and 1930 because a major economic crisis had driven Germany into a deep depression: banks crashed, businesses folded, and millions lost their jobs. Hitler offered voters a vision of a better future, one he contrasted with the policies of the parties that had plunged the country into crisis in the first place. The poorest people in Germany voted for his opponents, notably the Communist Party and the moderate left-wing Social Democrats, but the lower-middle classes, the bourgeoisie, the unorganised workers, rural masses and older traditionalists—Protestants and evangelicals who wanted a moral restoration of the nation— switched their votes from the mainstream centrist and right-wing parties (save for the Catholic Center Party) and gave them to Hitler instead.” (A Warning from History, The Nation)

Sri Lanka has been independent for 70 years but spend over 30 of them in conflict

The world faces similar threats today, a new wave of populists is rising through democracies and threatening its foundations: in Hungary (Orban), Brazil (Bolsonaro) and the Philippines (Duterte).

Democracy is not a spectator sport. At a minimum, it needs a widely diffused will among the people to make it succeed. This may be why it is so difficult to transplant. A population with little previous experience in the process may not learn the skills fast enough to make it work in the chaotic aftermath of a revolution, as evidenced by the Arab Spring.

Sri Lankans have long experience with democracy and value the concept. A recent survey by CPA (Values and Attitudes Survey on 70 Years’ of Independence in Sri Lanka) indicated that 74% of Sri Lankans preferred democracy to any other kind of government.

The adverse public reaction to the abortive coup of October 2018, despite the unpopularity of the ruling coalition, was remarkable and probably contributed to its ultimate failure.

Yet, while support for democracy is strong, its more arcane aspects may not be as well understood; a lacuna that has been exploited to undermine the system from within.

Constitutional changes in 1972 and 1978 eroded personal freedoms but were carried out by popular, elected governments. Some changes should never have passed, but did. For example, both constitutions expressly precluded the judicial review of enacted legislation and limited it to judicial review of Parliamentary Bills (within a limited period). Was the danger of removing this important check on executive power lost on the electorate? Is the urgency of restoring this understood?

More recently, the unconstitutional dissolution of parliament and the call for fresh elections to resolve the October crisis was an attempt to subvert ostensibly democratic procedures to legitimise the unconstitutional. The ploy may well have succeeded, if not for the intervention of the Supreme Court.

These events should impress upon Sri Lankans that we cannot take democracy for granted. Its foundations, under attack since independence, are frail. Sections of the population have already called for an economic dictator. Could it end by voting democracy away?

The call from history resonates:
“‘We are living in economic chaos, and we cannot get out of it except under some kind of dictatorial leadership” (“Socialism and the Problems of Democratic Parliamentarianism”, quoted by Hayek in the Road to Serfdom).

“The problem is that economies are complex, reaching agreement on a plan becomes difficult so… the conviction grows that if efficient planning is to be done, the direction must be ‘taken out of politics’ and placed in the hands of experts” (F A Hayek, The Road to Serfdom).

And in turn:
“Planning leads to dictatorship because dictatorship is the most effective instrument of coercion and the enforcement of ideals, and as such essential, if central planning on a large scale is to be possible…… There is no justification for the belief that so long as power is conferred by democratic procedure, it cannot be arbitrary; the contrast suggested by this statement is altogether false: it is not the source but the limitation of power which prevents it from being arbitrary”.

Democracy is not a spectator sport. It needs a widely diffused will among people to succeed

As Hayek observes:
“Hitler did not have to destroy democracy; he merely took advantage of the decay of democracy and at the critical moment obtained the support of many to whom, though they detested Hitler, he yet seemed the only man strong enough to get things done.”

If democracy is to survive in Sri Lanka, it must be sustained by an active citizenry; but to engage meaningfully requires knowledge, skills and the disposition to participate in civic life. But the habits of the mind, as well as “habits of the heart,” the dispositions that inform the democratic ethos, are not inherited but must be learned. This is the purpose of civic education.

Traditional civic education covers the themes of procedural democracy: principles, procedures, laws, good governance and the role, responsibility and rights of citizens. This alone is not enough.

The education must also cover liberal values because in practice procedural democracy, while the best available system, has a drawback: it is not a good way to resolve moral or ethical questions.  Democracy is built on majority views, but this may mean that alternative perspectives on issues that are in the minority, controversial, novel or particularly complex may be ignored. Th is is the problem of the tyranny of the masses.

“Democracy guarantees a system of government in accordance with the wishes and plans of the majority. But it cannot prevent majorities from falling victim to erroneous ideas and from adopting inappropriate policies which not only fail to realise the ends aimed at but result in a disaster” [Mises, Ludwig Von (1998a) Human Action].

Therefore, we must define democracy not merely in terms of procedures but as a mode of living founded on values: inclusiveness, pluralism, fairness, cooperation, dialogue and non-violent resolution of conflict. It is essential to transmit to younger generations a host of democratic values such as tolerance and respect for diversity, concern with the rights and welfare of others, freedom and justice.

These values are in perfect concord with the Buddhist values of Karuna, Maitri and Ahimsa. Parents may impart these values to children, but all too often their practise is restricted to family and friends. It must be extended to strangers, especially those that look, sound or live differently.

The war has ended, but the relationship between communities is still tainted by suspicion, fear, and a lack of trust. Half the population, women, face routine discrimination, harassment and violence.

Most people are comfortable interacting with people, behaviours and ideas that they are familiar with, but react with fear and apprehension when faced with the unfamiliar. Misunderstandings cause us to respond aggressively to perceived threats to the status quo or stability, even where none exist.

The recent hostility to Muslims is founded on ignorance, misunderstanding and fear. Sri Lanka has been independent for 70 years, but spent over 30 of those years in conflict. If the post-conflict era is to lead to lasting social peace, we must transform the unfamiliar into the familiar.

How should civic education take place?

It needs to be taught in schools, starting with the importance of a rules-based system. In Germany, it aims mainly to make students aware that no matter how negative the experience with democracy may be, it never justifies totalitarian ideas or behaviour, nor does it excuse violence as a way of dealing with different views.

Political education in Germany is founded on the conviction that democracy cannot be taken for granted, no matter how strong the democratic system seems to be and enshrines the following principles:

  1. Prohibition of manipulation (no indoctrination)

  2. The need for controversy and diversity (discussion of controversial political positions)

  3. Adapted to the skills and competence level of participants, and focus on empowerment and initialising political or civic activity; not just teaching facts

It also needs to discuss current political questions and phenomena. Controversial topics must be tackled, but with a focus on arriving at common solutions for political conflicts so that people learn how to resolve differences peacefully.

Sri Lanka removed civic education from schools in the 1970s, but fortunately, it was reintroduced in 2007 for grades 10-11 and extended to grades 6-10 from 2015. The teaching guide for civics is quite encouraging - the principal areas outlined above (except gender) are included. Unfortunately, it seems limited to only classroom instruction, and there remains the question of how well it will be taught. A rote-memorisation approach will not foster critical thinking, media literacy and values are necessary.

Other aspects of the syllabus, particularly history, are a cause for concern. For example, on the contents of history textbooks, Wettimuny references Sasanka Perera.

“The legend of battles between ancient kingdoms documented in the Mahāvamsa promotes Sinhalese-Tamil antagonism and suggests ‘a long and bloody tradition’ between the two races. Thus, the reproduction of this version of the past in the Sinhala Grade 6 history syllabus is highly problematic. It claims that the Sinhalese King Dutugemunu defeated the Tamil, ‘foreign’ ruler Elara in a war to protect Buddhism, to ‘reunite the country’ and ‘liberate the country from foreign rule’. By contrast, the Tamil Grade 6 history syllabus cites Elara as a leader that ruled ‘with justice’.”

Children sitting in linguistically segregated classes who learn diametrically incompatible versions of history, which emphasise historical injustice and continuing victimisation from irreconcilable textbooks, will not be well prepared to receive lessons in tolerance in a civics class.

To have a lasting impact, it must change attitudes so it must include practical aspects, involving cultural, extra-curricular activities as well as exercises and classroom lessons. The aim is that differences in viewpoint and culture are to be cherished and appreciated rather than judged and feared.

As the Dalai Lama pointed out: “Coexistence takes effort, but we should work to make this century an era of peace and non-violence. We need a human approach to solving problems between us. We need to talk instead of fighting, engaging in meaningful dialogue based on mutual respect. Anger is rooted in having a sense of ‘us’ and ‘them’. We need instead to respect others as members of humanity like us.”

Can Sri Lanka afford to feed 225 mouths?

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Dilshani N. Ranawaka

According to a recent news headline, the costs of parliamentary meals add up to Rs. 120 million annually. In addition, the total amount spent on electricity, telephone facilities, and drinking water is approximately Rs. 103 million per year. This brings the total to Rs. 220 million just to keep the Parliament functioning for a year, a place where poor policies and proper decorum are not taken seriously. However, there’s more to this story.

The story of meals

The parliament has 12 food and beverages outlets including five exclusive restaurants and VVIP dining suites. The resultant cost associated with this is Rs. 10 million per month. To put the cost in context, the aggregate amount is also equivalent to nearly one-fifth of the CESS revenue [1] (Rs. 542 million) collected through tea exports in 2018. Running a parliament is obviously vital, and given its size and functions, there are bound to be high costs associated with it. These costs however should be reasonable and justifiable.

The Parliament convenes only eight days a month

Parliament convenes on the first and the third week of the month on Tuesdays, Wednesdays, Thursdays, and Fridays. The only exception for this is when the Appropriation Bill is considered. However, even the process for the Appropriation Bill is restricted to a maximum of 26 days.

The official poverty line (OPL) is Rs. 4,856 [2]

The OPL calculated by the Department of Census and Statistics is the minimum amount a person requires for basic needs per month. Costs of Rs. 120 million annually just for food is comparatively a large amount. By looking at these numbers, it is evident that food expenditure can be reduced drastically. Has the present Government taken any measures to act on this?

Poor attendance

While expenditure on food is high, attendance in Parliament is low. The attendance at the last session held at the Parliament for this month was nearly 41%. There are numerous days where the Parliament does not convene because the quorum of 20 MPs is not met.

It is now evident that parliamentarians lead a highly luxurious life at the expense of the general public. Who is affected? Everyone except for these parliamentarians. Isn’t it obvious why people spend so much on election campaigns to secure their seat in the next election?

In their defence, the Finance Department of the Parliament claims 75% of this cost is incurred because of the parliament staff. However, the Budget allocates around Rs. 10,000 just for eight meals per parliamentarian. This fact is even more unacceptable because of the lack of commitment we see in them in solving issues of the country and standing for the people and for democracy.

The missing seats

It is known that MPs boycott the Parliament when there’s a crucial debate at hand. Statistics collated from Manthri.lk reveal that nearly 20% of the MPs were not seated for four out of eight sessions in the last three months (April, May, June). At the final session of this month, 92 MPs were absent. When representing their electorate, MPs are representing people. They are essentially the mouthpiece of their electorate in Parliament, and have committed to this role. It is important that the MPs know their significance in shaping governance and policies. Such absence in the Parliament is recorded even though they receive an allowance of Rs. 2,500 for each parliamentary sitting. If such positive incentives do not work, would a deduction for absence be a more useful nudge? In general, out of a 20-day monthly-cycle, an individual would try their best to report to work because of their responsibilities and piling-up of assigned workload. With all these facilities given to them to do a better job, are all these excessive expenses borne through tax money fairly treated by the MPs? The amount of wastage of resources created by Sri Lanka’s Parliament is unthinkable.

This further delves us to an important question that we further need to think on. The allocated amount for recurrent expenditure for the Parliament for 2019 is around Rs. 2.8 billion. Even though costs are indispensable in any process, it is evident that the Government spends an excessive amount of limited financial resources in this scenario. It is also evident that the Government does have the capacity to reduce such excessive costs which are indirectly borne by taxpayers. Even in spite of such privileges given to MPs, they have a low tendency to attend to the needs of people. The question to think about is are their services worth the money we spend on them? Don’t they have a responsibility to handle hard-earned public money responsibly? We are the financiers and they are our voice. The question is, do they do their job properly for us to bear all this cost? Is it worth it?

Edit: The previous version of this article stated that cost per parliamentarian on meals were Rs. 45000 per month. This number has now been corrected.

A light at the end of CEB’s 50-year tunnel?

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Dilshani N. Ranawaka

Ceylon Electricity Board (CEB), the state-owned enterprise that tries to power the nation has been making news headlines consistently over the past two weeks; on the topics of power failure, clashes between related entities, losses, and corruption.

The CEB’s mission and vision includes phrases like “maintaining an efficient, coordinated, and economical system of electricity supply” and “core values; quality, service to the nation, efficiency, and effectiveness”. Analysing news headlines related to the CEB over the past two weeks, the long list of issues plaguing electricity generation in the country makes it clear that they are not fulfilling their mandate.

2006-2017, the CEB accumulated a total loss of Rs. 186 billion (1).png

Issue one – losses

During a period of 10 years from 2006-2017, the CEB accumulated a total loss of Rs. 186 billion, in addition to the loss of Rs. 29 billion incurred in the year 2018. If the CEB was privately run, it would have been bankrupt by now, and if the firm’s sole intention was to survive in the market, major reforms would have been put in place.

However, when the State runs vital services;

  1. The government is required to bail out the organisation because they can’t stop its operations

  2. The government has no incentive to improve their performance. Supply shortages and accumulated mountain of losses along with reported corruption cases against the CEB should be a cause for concern
    The rationale is simple. If you invested a wealth of money on a particular service, wouldn’t you be concerned about profits and losses? Wouldn’t you take actions if you felt like there’s an increase in demand or a shortage of supply? Wouldn’t you take precautionary actions to deter or prevent corruption? Why would you be so concerned about your investment? It is because you have a sense of ownership and a special interest to succeed because it’s your hard-earned money.

Decision makers at the CEB do not feel a similar sense of ownership, and thus, do not prioritise cost reduction and profitability – after all, it is someone else’s (taxpayer’s) money and not theirs.

Problem

When a resource is not used in its maximum capacity, inefficiencies occur. When inefficiencies exist, more resources are used in order to produce one unit of electricity. Therefore, even though electricity is subsidised for public gain;

Electricity is still produced at a cost which is borne by the CEB. Since the CEB is the State and the State is still run by the people, taxpayers indirectly have to bear the cost of production. Investments in the CEB are made through taxpayers. The management is not properly incentivised to improve their performance because the CEB is heavily reliant on the government. If the CEB performs poorly, the security or bailing out by the government would always give them an ultimate form of protection, further enhancing weakened institutional gaps within the CEB. Recent reports focus on a dispute between the CEB and Ceylon Petroleum Corporation (CPC). According to these reports, the CPC had stopped supplying fuel for the CEB as they had exceeded the credit limit of Rs. 80 million and delayed payments.

After days of discussions, the CPC decided to increase the credit limit to Rs. 100 million, stating their difficult position as public banks are reluctant to provide credit to CPC. In this instance, the inefficiencies of one SOE affect the functioning of another linked SOE.

Issue two – clashes between energy sector-based entities

Since inception, the Public Utilities Commission of Sri Lanka (PUCSL) and the CEB have had a disputatious relationship with each other. There have been numerous cases filed against the CEB and vice-versa throughout the past three years. While PUCSL maintaining an independent role is admirable, these disputes have not been addressed. A series of coordinated meetings where PUCSL could inform the CEB of the complaints they receive could push home the point that efficiency needs to improve and would be a step in the right direction.

On the other hand, the CEB’s response to CPC cutting down their fuel supply was to not provide electricity to CPC. CPC being clear that they had exceeded their credit limit, shouldn’t it be CEB’s responsibility to initiate discussions with CPC?

Issue three – corruption
The autonomy given to the CEB without a doubt encourages corruption. Within the past two weeks, two incidents of corruption by the CEB have been reported in the news. The first was the purchase of malfunctioning turbines. Turbines are a vital component of producing electricity and their quality should be of the best standard. Are the responsible parties of the CEB incompetent? Or is it simply because they gain out of this purchase?

The second accusation against the engineers was that they have been purchasing electricity at higher rates. When the CEB purchases at higher rates, the party involved with the transaction gains a commission for helping out with the business. The higher the margin between the buying and selling rate, the higher these parties gain. Being aware that the national grid is short of supply and that the CEB is knee deep in losses, is it ethical for them to make such decisions? This accusation made by PUCSL is still to be defended by the CEB.

What is even more important is to question if this was the first time such corruption took place over 50 years of operating. Why is the Government not taking action on this?

Long-term solution

The long-term solution to these problems would require privatisation, with multiple benefits coming in by opening up the energy market. Presently, the energy market is dominated by the CEB. Opening the market for private competitors under the supervision of the Ministry would mean the following increase in competition motivates the CEB to reduce the costs of production in order to function smoothly and compete with similar suppliers; a solution for the current electricity shortage. Public debt burden will reduce, directing funds towards other productive projects and giving the State fewer responsibilities.

Why we won’t see this happening anytime soon

Presently, reports indicate that policies discourage private energy investors from entering the industry. The prolonged policy to increase the capacity of the grid is stagnant due to this discouraging environment within the industry.

Short-term solutions

  • Reducing the number of subsidiaries and sub-subsidiaries governed under the CEB: There are 14 subsidiaries and sub-subsidiaries under CEB. The CEB either could sell off its shares or make these subsidiaries operate independently from the CEB, lessening operational costs and improving accountability.

  • Investiture responsible managers to the governing board: The management should be accountable for an entity’s government. A strengthened management would reduce political interference and put a renewed focus on efficiency, improving performance, and reducing corruption.

  • Work together with PUCSL in improving their services: The objective of the PUCSL is to ensure that the public gets the best service out of these bodies. If these institutions do not work together to improve their services, the objective of establishing these two bodies would be completely in vain.

Sri Lanka is in the process of transitioning towards a more service-oriented economy. The role of energy and power should be a key component in making this transition smoother. CEB, even after being in the industry for 50 years is still not functioning smoothly as the consumers would have hoped. If the State’s role is to aid the public, would it be a hard ask to replicate the success of Sri Lanka Telecom with CEB too?

A rare window of opportunity for pension reform

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Aneetha Warusavitarana

The inconvenient truth about pensions is that they are costly. Governments across the world struggle with striking a balance between the dual objectives of pension adequacy and financial sustainability. Looking at Sri Lanka’s government sector pension, it is glaringly obvious that the costs associated with this scheme are exorbitant. According to the 2018 Central Bank report, the Government has incurred Rs. 194.5 billion as pension payments. This was a little over 9% of recurrent expenditure for the year, for a group of around 623,000 pensioners. Let that sink in – 9% of recurrent expenditure for less than 3% of the population. In comparison, the Samurdhi allocation for 2018 is only 2% of recurrent expenditure, and goes to around 1.4 million households.

The costs associated with pensions will only grow, as has been highlighted by the Central Bank. The Census of Public and Semi Government Sector Employees shows that 77% of our government sector employees are between 30-55 years. This means that over the next 30 years, the Government will see an additional 800,000-odd individuals moving into retirement, and in a nutshell, this is a problem which will only snowball into something larger.

Quick fixes?

The government sector pension is non-contributory – the entire burden of payment is shouldered by the Government – and given our fiscal position, this is an area where reform should be seriously considered. Reforming pensions is tricky – it is a highly sensitive topic, and if executed badly, could mean that the Government still spends a similar amount on the same group of people, but through social transfers for the impoverished elderly as opposed to through a government-funded pension. There are however, some soft reforms which would be easy to implement, and which would have a positive impact on our pension system for both pensioners and the Government.

A quick fix would be to increase retirement ages…Sri Lanka’s demographics are such that we have a rapidly ageing population, with rising levels of life expectancy. In and of itself, this isn’t a bad thing, but it means the Government and policymakers need to think about how people will spend their old age. Future generations will be able to work for longer periods of time, and it is vital that this ability is reflected in our legal systems. Increasing retirement ages has been widely adopted across OECD (Organisation for Economic Co-operation and Development) countries which also have similar demographics to Sri Lanka. From the perspective of pension payments, this will slightly ease the burden placed on the system right now. To ensure that this reform doesn’t place undue shock on employees in older age brackets, who have planned to retire in the next few years, this is a reform that can typically be introduced to younger cohorts of employees.

It is impossible to introduce sustainable reform for the elderly without looking at reforms needed throughout an individual’s life cycle. Your quality of life as an aged person is determined by the life you led in your youth. Employment, health, disposable income, financial literacy, marriage status, and a myriad of other factors affect how an individual experiences their retirement.

Opportunity for greater reform

Right now, there exists a window of opportunity for the Government to holistically address old age security. This window exists for three reasons. The first is that all government employees hired after 1 January 2015 do not fall into the current non-contributory pension scheme. They are in a kind of no man’s land where they have been promised a pension, but the details of what this pension benefit will be like has not been made clear. It is not an enviable position to be in, but in making this adjustment, the Government has created a window for pension reform. As it is clear that these employees do not fall into the current non-contributory pension, the Government can bring in a new contributory pension scheme for the government system, where both the Government and the government sector employee contributes.

It will take decades to move out of the current commitment the Government has to those in the non-contributory scheme, but at least we can be certain that decades from now, the pressure that the non-contributory scheme exerts on the national budget will be reduced.

The second reason there is a window of opportunity is because the Government has promised to introduce a national pension scheme. The name implies that this would be a scheme that goes beyond the government sector, encompassing the private sector and the informal sector. As the private sector has coverage through EPF and ETF schemes, the widely uncovered informal sector will pose a challenge to those designing this pension scheme. However, the positive of this is that the Government has made a very public commitment to wide pension reform, under which reform of the government sector will be included.

The third reason for this window of opportunity is the recently discussed labour law reforms. Sri Lanka has a multitude of labour laws, and the reform proposed is to unify these laws under one common labour law. During this process, there will also be room for amendments to be made to the more archaic aspects of our labour laws – hopefully to ensure that our laws reflect a drastically different working experience than was there a hundred years ago. There is scope for reforms such as increasing the age of retirement and making flexible/part-time work more attractive – which would be a step towards attracting more women into the workforce. With female life expectancy, more women in work means more women with agency and greater financial stability in their old age.

What does all of this mean?

Labour reform and pension reform are inextricably linked to each other. The fact that discussions for reform in both labour law and pensions are ongoing is serendipitous – now the focus of work should be to ensure that reform has financial sustainability as well as adequacy at the forefront.

Will the sugar tax leave a bad taste in your mouth?

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Aneetha Warusavitarana

Rising rates of obesity and incidence of non-communicable diseases (NCDs) have long been a point of concern for the Sri Lankan health sector. As a country, we have made significant strides in addressing the challenge of communicable diseases, and now policymakers are shifting focus onto NCDs. The imposition of a tax on sweetened drinks in 2018 was a point of serious debate. It was both lauded as an admirable step in tackling the issue of NCDs, while simultaneously facing serious protest from the soft drink industry.

In 2018, the 51-day Government reduced this tax, and now the present Government stated that it will re-impose the tax, citing health concerns as the motivation behind it. While a final decision is yet to be taken on this, given that this is the same Government that imposed the tax, it seems likely that we will be seeing a tax increase.

Political packaging

Sugar tax

Imposing this tax is an easy way to gain some political mileage. The narrative presented is simple – obesity and non-communicable diseases are a serious health concern for the Sri Lankan population. Sugar consumption is a contributor to this problem and as a responsible Government, they need to take steps to discourage consumption – this will be done through a tax per gram of sugar in carbonated drinks. In essence, the tax is packaged as a health-positive policy measure. Indeed, at face value, the tax does present as such. However, there are a few questions which can be raised.

Is this tax fair?

There are two things in life that are certain – death and taxes. While it may be that we will have to continue paying taxes, these taxes should be sensible, effective, and should not be prohibitively burdensome. This idea has been espoused in basic principles of taxation to ensure the tax is effective and equitable. One of the principles the OECD expounds is that of neutrality: “Taxation should seek to be neutral and equitable between forms of business activities.” Neutrality also means that the tax system will raise revenue while minimising discrimination in favour of or against an economic choice.

In the case of the sugar tax being imposed by the Sri Lankan Government, it is clear that the principle of neutrality is not adhered to. At a fundamental level, it is a “sin tax” or a “fat tax” – a tax being imposed to change the economic choices of the population – the aim of the tax is not to raise revenue, but to shift consumer behaviour away to more healthy options. Given that the sugar tax is applicable only to carbonated drinks, and excludes other sweetened drinks like fruit juice or milk packets, it is clear that the principle of neutrality has been ignored here.

Does unfair equal ineffective?

The principle of neutrality in taxation is all well and good, but does this affect people? The answer is yes. When the principle of neutrality is violated and a tax is imposed in a manner that is inequitable to business activities, it loses its effectiveness. The objective of this tax is to discourage the consumption of carbonated drinks with a high sugar content, to achieve a higher goal of good health. When the tax is imposed unfairly only on carbonated drinks, it means the consumers which simply substitute a carbonated drink with an alternative – and there is no guarantee that the alternative will be a sugar-free, healthy one. In fact, the likelihood is that people will switch to a different product with a similar calorie/sugar count – if a bottle of fruit juice is cheaper than a bottle of Sprite in the supermarket, you don’t want to pay more for the bottle of Sprite and you are likely to buy the juice instead. The health concerns will not end up being addressed because consumers will simply substitute one drink which is high in sugar with another drink that is also high in sugar.

Unfortunately, in the case of taxing food and beverages, the issue is that consumers can simply choose to continue to consume a similar level of sugar, just from a different source. Given that this tax only applies to one category of sweetened beverages, consumers can easily substitute it with another, cheaper beverage. There is also the question of whether sales of carbonated beverages drop; international evidence has mixed results. While the WHO (World Health Organisation) applauds these taxes, other studies question whether the tax affects sales of carbonated drinks to an extent that it would have an effect on overall health, or whether consumers are simply shifting preference to an alternative which is an equally sugary substitute.

The final word on this is that there is, at best, uncertainty about whether this tax creates a positive health externality; and at worst, consumers switch to unhealthy alternatives while businesses lose out on revenue.

Are Japan and India taking over the Colombo Port?

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


By Nishtha Chadha

Negotiations on the Colombo Port’s East Container Terminal (ECT) have certainly racked up their fair share of controversy over the last year. Infamous for the onslaught of last year’s political crisis, the ECT presents one of Sri Lanka’s greatest economic and geopolitical opportunities due to its prime position and immense untapped capacity. The recent ECT Memorandum of Cooperation (MoC) signed between Sri Lanka, Japan, and India is no exception. The agreement reignited hardline nationalistic debates from trade unions and recurring spates of “Indo-phobia”. JVP Leader Anura Kumara Dissanayaka even equated the move to selling off national resources as ransoms, which threaten the national security and economic sovereignty of the country. But such hardline opposition to the agreement begs the question: What exactly is being given up?

What’s in the Memorandum of Cooperation?

According to the Sri Lanka Ports Authority (SLPA), the MoC states that the SLPA retains 100% ownership of the East Container Terminal. The Terminal Operations Company (TOC), which will be responsible for all operations within the terminal, will be jointly owned by Sri Lanka, Japan, and India. Sri Lanka will maintain a 51% stake in the company, while Japan and India will hold minority stakes of 34% and 15%, respectively. Development of the ECT will be financed by Japan through a 40-year soft loan of between $ 500-800 million. The loan will be at a 0.1% interest rate with a grace period of 10 years. The SLPA boasted the terms as one of the best agreements it has ever negotiated.

So, why is the ECT so important?

Estimates suggest that within the next three decades, over 45% of global GDP and trade will emanate from the Asia-Pacific region. At the heart of the Indian Ocean, the Colombo Port is in prime position to enjoy the lion’s share of this predicted growth. Ranked 11th in connectivity and 22nd amongst global ports, demand for the port is increasing steadily, and so is its competition. As the Colombo Port’s three current operational terminals, the Jaya Container Terminal (JCT), South Asia Gateway Terminal (SAGT), and Colombo International Container Terminal (CICT) struggle to meet capacity demands, the development of the ECT has certainly become a matter of urgency.

India’s new Sagarmala port development initiative also escalated anxiety amongst policymakers about potential loss in business, as over 70% of transhipment that passes through the Colombo Port is linked to India. Construction of the Enayam Port in nearby Tamil Nadu and the Kerala port, which is soon to be world’s deepest multipurpose port, suggest an explicit and pressing need for Sri Lanka to diversify its partners in the shipping business to keep the Colombo Port competitive. The best way to do this is to implement incentives for new investment, upgrade ancillary services for current and prospective consumers, increase efficiency to facilitate quicker turnovers, and expand berthing capacity to meet growing demand.

Why can’t the SLPA just develop the terminal?

Indeed, the largest opposition to the agreement has been the argument that if the SLPA is fit to develop the ECT itself, why is the Government getting other partners involved? However, the capacity of the SLPA to complete these development activities is more than dubious.

Though the SLPA has been one of the few state-owned enterprises able to recover any semblance of profit in recent years, it is also suffering from serious decline. According to the Ministry of Finance’s 2018 Annual Report, the SLPA saw its profit after tax reduce by 88%, from Rs. 12 billion in 2017 to Rs. 1.4 billion in 2018. This is in addition to total expenditure of the authority increasing by 5.5%, from Rs. 28.5 billion in 2017 to Rs. 30 billion in 2018. Moreover, if one interrogates the sources of this profit, it becomes painstakingly clear that the only reason the SLPA is even able to recover “net profit” in the first place is because of the high performance of its privately run terminals, the SAGT and CICT, which markedly outperform the SLPA-run JCT. The authority is bloated, unproductive, and cannot specialise in service provisions the same way that private operators are be able to.

The Government itself has even admitted that the SLPA does not have the funds or capacity to undertake the required development activities within the time period or at the scale required. The recent Easter attacks, combined with the last 12 months of political turbulence, have tightened budgetary constraints and fiscal burdens on the national economy. As such, the optimal solution to Sri Lanka’s rising economic maladies is to capitalise on national assets by trying to attract external investment capital and improve efficiency. The liberalisation of port practices and the introduction of competition to the industry is an avenue worth pursuing. Given the importance of the port to Sri Lanka’s participation in international trade, the objective of the management system should be to achieve efficiency gains and generate new traffic in the ECT. This can only be done by improving service offerings and removing bureaucratic impediments, not coddling trade unions and stifling economic potential.

The fact that the SLPA retains a 51% stake in the TOC is a cause for concern in itself. The SLPA should not be playing the role of both a service provider and a regulator. This severe conflict of interest not only undermines competitive neutrality, but also consumer confidence. Instead, as the sole owner of the port, the authority should be transitioning its role into one of a landlord, responsible only for monitoring port performance and the enforcement of regulatory standards.

A step in the right direction

While the agreement on the ECT is not perfect, it is a step in the right direction. The dream of becoming Asia’s next maritime hub is not far-fetched for Sri Lanka, but it will only be possible with the right reforms in place and an honest openness to foreign participation. Time and again, we have seen global supply chains expand domestic markets, and there is no reason for Sri Lanka to miss out.

The performance of the SAGT and CICT have proven Colombo’s maritime potential, and it is time the Government made a concerted effort to achieve this. Sri Lanka has approximately 750 local shipping, freight forwarding, and clearing agents, but this is minuscule in comparison to Singapore’s 5,000. In order to make the most of the ECT’s capability, Sri Lanka needs to implement supplementary reforms that will attract leading shipping companies to bring their business to Sri Lanka and set up regional hubs for operations. This includes creating a stringent and transparent regulatory environment, as well as significantly reducing the bureaucratic and financial barriers that currently deter prospective stakeholders.

It is important to understand that maintaining economic sovereignty does not come from shutting out foreign capital and deep-diving into protectionist policies that accelerate economic decline; but rather, from capitalising on strategic opportunities that promote increased employment and growth, which thereby translate into economic agency. The Colombo Port is ripe for growth potential, and the Government should be proactive in implementing key reforms that will transform Sri Lanka into the maritime hub it seeks to be.

Limited government – Ideal State

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


Limited Government; Ideal State – Part IV

By Dhananath Fernando

This article completes Advocata’s four-piece series on “limited government”. Over the past three weeks, we have presented three arguments in favour of a limited government. We began the series by delving into the mounting costs associated with a government of this size. The article questioned the rationale behind expenditure on this scale, given that the services provided by the Government are characteristically inefficient. Erratic power cuts and railway strikes seen in the recent past are testament to this. From here, the series explored the question of how a government can best serve its citizens.

The main argument presented was that when the powers and responsibilities of the State are decentralised, voters are given a stronger voice and are better able to hold elected officials accountable. The result is that public finances are better managed and service delivery improves. The last topic tackled in this series was that of corruption, expanding on how the window of opportunity for corruption widens when a government grows in scope as well as physical size, without the necessary governance and accountability measures in place. All three articles concluded on the same point – the size and role of the Government needs to be re-visited.

At a fundamental level, a government exists to protect the life, liberty, and property of its citizens. This is the first and foremost responsibility of a government and it is vital that this is given priority. The danger of governments expanding into other sectors is that these foundational responsibilities are pushed to the sidelines. When a government provides subsidies, creates price ceilings, and gives ad hoc handouts, it loses incentive to focus on its priorities. Giving a subsidy has an immediate impact on its voters and a cycle of instant gratification begins. Parallel to election cycles, governments now have an easier, quicker method to win over voters. Ensuring the rule of law and enshrining the negative freedoms of a population does not have the shiny appeal of a handout – the positive, virtuous cycles these freedoms and protections create are strong, they can permeate institutions and change cultures of work. However, they can take years to come into effect and are difficult concepts to convey through the flashy advertisements of an election campaign.

Of course, this means that governments respond to the attractive incentive of a quick win and an extended term in office, and prioritises the handout over the fundamentals of freedom. As much as these freedoms can create virtuous cycles of growth and development, the neglect and deterioration of these freedoms can create dangerous cycles of corruption, misuse, and violence.

The best way to illustrate these dangerous cycles is through the justice system. Unfortunately, we witnessed first-hand the aftermath of the Easter attacks where virulent rhetoric against the Muslim community resulted in riots, with 500 Muslim-owned shops being attacked and set on fire. In the face of this outbreak of violence, the rule of law was flagrantly abused, and peace was not upheld.

Eammon Butler, in his book “Foundations of a Free Society”, expounds on this in some detail. According to him, the rules of justice are a cornerstone of any free society. While rules of justice would mean there are penalties for harming other people, in a free society, emphasis is also given to ensuring the role and power of a government is strictly limited. This will mean that the monopoly over violence a government has will not be used arbitrarily or in the self-interest of those who wield it. To quote: “The main problem of political organisation is not how to choose our leaders – that is easy – but how to restrain them.”

This seems reasonable and rational. No one wants an army-running rampant – you want to ensure the people with the guns and ammunition have clear rules on when and why they can use it. Most governments recognise this and have mechanisms such as constitutions and the separation of the executive, legislature, and judiciary to restrain those in positions of power. But the foundation of this is to ensure that citizens are all treated equally under the law – that all laws apply equally to all citizens and there is equal treatment and due process of justice. For freedom to have meaning, it has to apply equally to the whole population. When this does not take place and there is essentially a break down in the rule of law, the immediate impacts might seem inconsequential. It might mean that someone gets out on bail when maybe they shouldn’t. It might mean that tariffs are raised to protect politically important local business interests. Taken alone, these are singular events, which, while problematic, don’t cause much consternation. However, this is a slippery slope which often ends in widespread corruption in the best case, and a complete breakdown of law and order in other instances.

Once again, recent events illustrate that all citizens are not treated equally under the law, and that instances where law and order break down are increasing in frequency. The Wennappuwa Pradeshiya Sabha (PS) Chairman issuing a letter prohibiting Muslim traders from conducting business at the Dankotuwa Market is a case in point. It is of utmost importance that steps are taken to ensure the rule of law is maintained, and the Government prioritises its core functions putting the safety and freedom of all its citizens at the forefront.

Axe-ing local carpenters

Originally appeared in the Daily Ft and Daily Mirror

By Dhananath Fernando

On 6 June, for World Environment Day, the President stated that he will ban carpentry sheds, and will ban the import of machinery used to cut down trees. Since that statement, there has been considerable policy confusion. It is unclear whether the Gazette notification was amended to ban carpentry sheds and these saws, or whether given public outcry, the ban was not implemented (Update: the ban was approved).

The policy decision to ban carpentry shops will have a similar situation. The ripple impact across livelihoods, industries, and supply chains is difficult to quantify.

However, this is still a matter worth discussing. Even if the Gazette is not amended, a precedent has been set for people in positions of power to take misguided decisions, which could affect the livelihoods of thousands of people. In this instance, the intent of this decision is to address problems of deforestation - the question is, will it achieve this goal?

In Grade 8, we were taught the negative impacts of disturbing the equilibrium in a system or an ecosystem. That should be the first lesson for all leaders in Sri Lanka, before they even think of the word “policy”. To date, I recall the story of my Science teacher. In a forest where deer and lions coexisted, the then-ruler realised that deer were the prey for lions - a situation the king felt was unfair. As a result, the king made a royal decree that all lions in the forest should be killed, in order to protect the deer. For a few years, this appeared to be a wonderful decision. However, a few years later, the absence of a predator resulted in a sharp increase in the deer population. As a result, the food sources in the forest were not adequate to sustain this unprecedented boom in population, and the deer had to resort to eating the barks of trees. Overtime, the damage to tree barks affected the overall health of the forest, as trees began to wither and die. The increased scarcity of food meant that the deer population did not have enough sustenance to survive. In simple words, the good intention of protecting the deer population ended up in the collapse of an entire ecosystem. 

Undoubtedly, the policy decision to ban carpentry shops will have a similar situation. The ripple impact across livelihoods, industries, and supply chains is difficult to quantify. However, there are a few consequences we can predict. 

Carpentry Problem

Furniture prices are likely to increase 

The banning of carpentry sheds will reduce the furniture supply in the market, pushing prices of wooden furniture up. The hike in prices will mean that sales drop, pushing carpenters out of the industry. As the President has halted approvals for new carpentry shops, the industry is effectively condemned to an early death, with no ability for new players to enter, and no incentives for current players to expand in the industry. 

 Incentivising deforestation, bribery and corruption

With the prices of wooden furniture skyrocketing, the President has created a situation where any industrious, entrepreneurial minded individual would want to enter this industry. However, as permits for new carpentry shops have been halted, there is no legal path for people to enter the industry. The incentives are then for these people to enter the industry illegally, using bribery as their entry ticket. The consequences of illegal logging and unregistered chainsaws are much larger than those of allowing this industry to function within a regulatory system. The Government will not be able to monitor or regulate the levels of deforestation in the country, and we are likely to witness an increase in loss of forest cover. 

Lack of innovation and unemployment across sectors

These new restrictions placed on the carpentry industry provide no incentives for people to innovate within the industry. New, affordable and effective ideas which would aid environmental protection are unlikely to come about. Other countries have experimented with private forests, industrial timber cultivation and development of equipment to minimise wastage and enhances productivity. This will not be the case in Sri Lanka. The impact will not be limited to carpenters. No industry exists in a bubble, it is supported by a myriad of ancillary industries which will all be affected. Transportation, painting, polishing, varnishing, wood carving, cushioning, housing, construction are just a few examples of industries which will be affected by rising costs of furniture. 

Possible solutions 

At present the import tax on furniture is 88%, pricing imported furniture out of reach of the majority of the population. With no alternative, people turn to locally produced furniture. It is unlikely that the carpentry industry is the driving force behind all deforestation problems in the country - but even if it were - a more effective policy reform would be to lower these taxes. If imported furniture was more affordable, consumers would change their preferences and demand for locally produced furniture and the logging behind this industry would fall. 

The current tax of 88% on furniture imports is difficult to justify. If the Government is concerned about the environment, it should be able to put aside its protectionist agenda for a decrease in the rates of deforestation. That no steps have been taken in this direction indicates that their motives may not be as clear as we thought. 

Bringing down taxes on semi-products and finished furniture products is vital to improving consumer choice and competition in the furniture market. This would encourage new entrants to the industry, and the increase in competition would mean that there are more incentives for people to develop environmentally friendly business models. 

Less spending, less corruption

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


Why should we have a limited government? – Part III

By Aneetha Warusavitarana

The World Bank quite simply defines corruption as the “abuse of public office for private gain”. Accordingly, public office can be abused when private agents actively offer or accept bribes, institute practices of patronage and nepotism, and engage in the theft of state assets or misuse public funds. In Sri Lanka, corruption has become institutionalised and can range from the traffic policeman who accepts a bribe to a high-ranking bureaucrat siphoning public money for personal expenses.

In 2018, Sri Lanka ranked 89th out of 180 countries in Transparency International’s Corruption Perception Index. As a country, we score 38 out of 100, with 100 representing a clean, corruption-free country. The magnitude of this problem is clear.

What’s the big deal about corruption?

Bribery

Is corruption really bad? You can’t deny that when your garbage is piling up, it’s easier to bribe the garbage collectors to take your garbage than visit your municipal council and file a complaint. Sometimes, it can just be easier to pay a bribe to the traffic police than go to court and settle a traffic violation, or to pay a little extra and get your driving license renewed faster. These are all very mundane, commonplace occurrences that have become normalised to the point one does not think of it as “corruption”. It’s just a small payment to make your life a little easier – a small payment to ensure an application is processed smoothly. So, if corruption can make things simpler, what’s the issue?

While corruption on this scale can appear to be insignificant, in reality, it is one component of a much larger, systemic problem which has far-reaching consequences. Corruption in government is institutional, and given the outsized role the Sri Lankan Government plays in markets and business, the impact is far-reaching. The difficulty in holding government officials accountable and the considerable discretion they can wield creates an environment in which corruption can flourish.

The far-reaching impacts of corruption

Large corruption scandals often focus on the amount of money that has been misused, placing emphasis on face value loss that is created by corruption. However, the impact of one act of bribery or corruption goes far beyond the initial monetary loss. Corruption raises the transaction costs of conducting business and creates uncertainty in the market. In an environment where corruption flourishes, a business will not win a contract based on merit and skill alone. Procurement-related issues (read: corruption) associated with the Kerawalapitiya Power Plant meant that it took three years to award the tender. This lowers profitability within firms and creates an overall environment of uncertainty which discourages foreign investment. The result is that the positive spillover effects from investments, like increased competition and technology transfers, will not take place. Corruption also reduces the attractiveness of entrepreneurship, resulting in higher prices and lower quality. The problem does not end there. The culture of corruption is one of impunity and complete disregard for the rule of law. When this culture permeates the government, it affects the independence and credibility of the legislature and the judiciary – the very institutions which should be ensuring that the rule of law is upheld.

State-Owned Enterprises and corruption

Sri Lanka’s state-owned enterprises are a prime example of institutionalised corruption. In Advocata’s flagship report, the State of State Enterprises in Sri Lanka – 2019, the problem of corruption is a key issue tackled. In this report, corruption is explained through the perverse incentives that exist in the Sri Lankan bureaucracy. In the case of state-owned enterprises, as the money invested in state-owned enterprises is not of the politicians, there are no incentives for politicians to work towards making these enterprises efficient or productive. However, given the deep-rooted culture of patronage that exists in Sri Lanka, there is a strong incentive for politicians to use state-owned enterprises for their own gain. The lack of oversight or accountability means politicians can hire almost indiscriminately, giving out jobs for political gain. The reports from the Committee on Public Enterprise (COPE) make this abundantly clear, highlighting the numerous instances where recruitment had taken place without the appropriate approval from the Department of Management Services.

This problem is exacerbated by weak systems of accountability and governance. While the COPE and the Committee on Public Accounts (COPA) do play a role in the governance of state-owned enterprises, they have access to limited resources and equipment and are in need of specialised skills such as legal aid.

What is the solution?

If corruption is the abuse of public office for private gain, then in order to stop corruption, we should focus our attention on how and where this abuse happens. When the government moves outside its core mandate to protect life, liberty, and property, it grows in size and in scope, making the government difficult to monitor and hold accountable. Additionally, as a government grows in size, so does its spending. Changing a culture of corruption will take a great deal of political will and leadership, as well as buy-in from the bureaucracy. While accountability and transparency play an important role in countering corruption, the effects of this are seen in the long term. In the short term, focus should be on limiting the scope of the government and thereby drastically reducing government spending. A 10% cut of Rs. 3 million is significantly lower than a 10% cut of Rs. 300 million; reducing government spending is the fastest way to reduce corruption in quantitative terms. A reduction in government spending will also make transparency within the government easier to enforce, helping create a culture of accountability.

If we are to seriously tackle the problem of corruption in government, the role and scope of the government needs to be revisited and limited.

Decentralisation: Taking governance to the ground level

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In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning


Why should we have a limited government? – Part II

By Aneetha Warusavitarana

When speaking of a limited government, the first thing that comes to mind is the fact that governments tend to be so expansive. A plethora of ministries and an innumerable amount of departments and agencies spring to mind. However, it is important to keep in mind that when speaking of a limited government, the rationale goes far beyond arguing for fewer ministries and reducing the duplication of work and responsibilities within the government system. A limited government is one that is limited in scope – it identifies its key functions and expends all resources to achieve them. When speaking of the role of the government, its primary functions can be described as the protection of life, liberty, and property. When a government’s main role expands beyond this, there is a strong likelihood that the government will prove to be ineffective and even harmful.

How can a limited government run a country?

It’s all well and good to say that the role of the State should be limited to the protection of life, liberty, and property, but governments also provide a myriad of public goods. Doing all this requires resources, people, and departments. Given that this requires a significant amount of administration, how do you ensure the government does this effectively, while staying within its key mandate and with minimal corruption or abuse of power?

Can decentralisation be the answer?

Decentralisation

Why should Sri Lanka move away from a centralised system of governance and increase the levels of decentralisation in the country? While there are some very theoretical explanations for decentralisation (which are important in their own right), we will use a simpler approach. In a population of approximately 21 million diverse people with different interests, preferences, and disposable incomes, how do markets allocate resources efficiently? Any A/L economics student will reply with the brief answer of the “invisible hand”. In reality, of course, there is no puppet master moving fruits and vegetables from one place to another. Each individual business acts in their own self-interest, resulting in a more efficient allocation of resources. Prices signal to these businesses – and the profits or losses these businesses make guide decisions to produce or sell – and thus, without the convening of committees or the presentation of any findings, an entire country is provided with goods and services it requires. William Easterly sums up this phenomenon as such: “The wonder of markets is that they reconcile the choices of myriad individuals”.

Price signalling works well in allocating resources because at any given point of time, it is impossible for one bureaucrat, or even a host of committees of bureaucrats, to have all the information necessary to dictate the production and distribution of a single good in an economy, much less all goods in an economy. This is because information and knowledge are localised, time sensitive, and tacit. In other words, information and knowledge cannot be transferred effectively in their entirety or in time. The fall of the Soviet Union is a testament to this.

What do markets have to do with decentralisation?

The same principle applies. The decision-making in a market economy is never centralised. While decentralisation will, of course, function differently – the spontaneous order created by price signalling in markets will not be making administrative decisions – the principle that centralised decisions are not effective stands. The reason behind this is that the information problems, which plague centralised decision-making of economics, also plague centralised decision-making for administration and governance. As much as a bureaucrat will find it impossible to distribute exactly the number of potatoes required to each province of this country, it is equally difficult for a bureaucrat to be located in a central government and to take decisions on local infrastructure. Any decision taken at a central level will not be ideal. There will always be information and local contexts that a bureaucrat is not privy to, and as a result, the decision will not be as effective.

Decentralisation brings governance and administration down to the ground level – it means decisions are taken by local government authorities who are best placed to make that decision. They are aware of local contexts and have been elected into office by the people in the locality, which would mean they have an understanding of what is needed. Of course, where the rule of law is weak, decentralisation can mean that local government authorities succumb to crony capitalism, as a system it is not without its faults. However, when comparing central governance and decentralised governance, in the case of decentralisation, there is greater opportunity for electorates to hold their representatives accountable, make their demands heard, and push for the reform that they want. In other words, it puts more power with the people and makes elected individuals more accountable to their voters – an admirable objective not only in principle, but also because of its effectiveness.

Should you say no to that government pension?

Originally appeared in the Daily Mirror

By Aneetha Warusavitarana

From a purely individualistic point of view, working in government can seem as a great choice. Government jobs come with perks; allowances of all natures and a guarantee that even if you underperform, the worst that can happen to you is a transfer – you will not lose your job. 

Once you hit 55, the deal is sweetened. At the point of retirement, you are provided with a pension package that beats ones offered by OECD countries, hands down. The best part of the pension package? You don’t contribute a single rupee towards it.

Why? Because the Sri Lankan government currently runs a non-contributory pensions scheme. Simply put, the government provides a monthly pension payment from the point of retirement to the point of demise. The World Bank places this monthly payment between 83 percent – 88 percent of the employee’s final salary, to which the employee does not contribute. In contrast, the private sector is covered by two provident funds, namely the Employers Provident Fund (EPF) and the Employers Trust Fund (ETF). In the case of the EPF, employers contribute 12 percent and employees contribute 8 percent. Employers contribute 3 percent to the ETF. When looking at the public sector pension scheme from a purely welfare perspective, it is difficult to find fault – a benevolent state is providing its retired government servants with a generous pension plan.

Why should citizens be wary of such benevolence?
According to the World Bank Development Update 2019, the current cost of pension payments amounts to 1.4 percent of GDP, and it is set to increase in the coming years. This is a considerable financial obligation that the government has made – and it is clear that there is worry about how financially sustainable a scheme like this is.

The government has made it clear that reform in public sector pensions is needed, and has taken an initial step to stem the outflow. All government employees hired after the 1st of January 2016 are not included in the present pensions scheme. The government has stated that a new pension scheme will be introduced for all employees hired after this date, making it evident that they wish to phase out the existing scheme.

Apart from the unaffordability of this public sector scheme, the consequences of it are far reaching - it affects productivity in the government service and labour markets in general.

 All the wrong incentives
Complaining about government inefficiency is a fond past time for many Sri Lankans. Some would say that nothing goes as well with a strong cup of tea than a good rant about the government. 

Let’s put the cup of tea down for a minute (just a minute), and ask why the government is so inefficient? There is a general understanding that if you want efficiency, you should look towards the private sector, and not the public sector. 

But why? Surely the government could hire the same sort of people and thereby achieve similar levels of efficiency. Part of the issue lies in the perverse incentives created by a culture of status, consistent increments which are not dependent on performance, and a guaranteed retirement. 

It seems a bit cold blooded to say that guaranteeing someone a decent retirement is a bad thing – but the argument runs deeper than that. Providing employees with retirement plans is not inherently bad. However, these plans need to be structured in a way which incentivizes your employees to work productively and efficiently, while ensuring that the employee (the government in this case) is not crippled by the financial obligation. 

Right now, in the government sector, part of the problem lies in the non-contributory pension scheme. Receiving a pension; receiving a good pension that you did not contribute towards creates a sense of entitlement.

A pension is now a right and not a benefit that is worked towards. After all, people are self-interested, and require the right incentives to be productive and efficient. The public service overall does not provide these incentives, and the pension scheme is only one contributor to this problem.

Labour markets 
Pensions also affect the flexibility and mobility of a country’s labour force. The long vesting period (requiring a worker to stay in that firm or that sector for a defined period of time to be eligible to receive a pension) of the government sector’s pension scheme affects labour mobility as workers are less likely to move between jobs and sectors. While one outcome would be that skills and knowledge would not be transferred across sectors, a more economically damaging outcome would be the perverse incentive for people to join a sector simply for the pension benefit, reducing labour productivity and competition.

This can be seen in Sri Lanka where many university students only want to work in the government sector. There are routine protests against the government for their not being provided cushy government jobs, and in response the government provides 10,000 students around election time. 

How does this impact labour markets? There is a continuous surplus of unemployed graduates, waiting for government jobs – and not considering other options.

Additionally, there is a significant opportunity cost that takes place - people join the government under the assumption that this is the best job available - the option of a job in the private sector is completely disregarded, even though opportunities for job progression, creating an impact, and better wages are all a possibility. 

Prudent financial management could mean that one retires with greater stability than a government pension provides. It is only a shift in mindset that is required. 

Sri Lanka pensions

 Solutions
Nevertheless, the budget speech 2019 stated that a national pension plan would be introduced, implying that this plan would extend beyond the public sector to include private sector and informal sector workers. However, the greatest reform need lies with the current government sector scheme. A few small reforms could be implemented to ease the financial burden that the government currently has to bear for all government employees hired before Jan 1st, 2016. 

The first would be increasing the age of retirement and changing the pension calculation to one that is based on the average wage over the best five years of employment instead of final salary. In order to make this reform more palatable, it is possible that these changes are introduced for the younger cohorts of employees and not those who will reach retirement age in the next five years. In conclusion, before acting on the promise of a national pension plan, the current one should be better managed and made 
financially sustainable.