What economics can teach Sri Lanka about PCR testing

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

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By Dhananath Fernando

Beginning with our education system, when a student successfully completes their Ordinary Level they are segregated into Commerce, Arts and the ones with the best results choose Maths or BioScience. A completely new direction from the humble times of the O/L. A student at the end of their studies in their chosen field can become a great medical practitioner, a legal profession, or even an engineer. But during their time at university or as a matter of fact in school their basic knowledge in economics, such as what drives inflation, interest rates, why am I getting less dollars than last year at the money changer, is at the mercy of a silver tongue politician, a master of selling excuses. The excuses which are hastily gulped by you, the ordinary citizen. The current economic situation created by Covid-19 is a sterling example of this disconnect. Many well-educated citizens who haven’t studied rudimentary economics during their learning years join the workforce in obedience. What you don’t know won’t hurt you. Sometimes even those who studied economics have forgotten that ‘Economics’ is the social science of production, distribution, and consumption of goods and services. We all often miss the common sense that we have to make a continuous effort on making our choices with limited resources available and organise and coordinate to achieve maximum output by increasing productivity. Ultimately economics is about you. In this case “ability to test” at present is our limited and most scarce resource. How we utilise it to the greatest effect is probably the decision-maker on how fast we can overcome and how to minimise its impact on the wallet of each Sri Lankan. Undoubtedly “testing” in isolation will not work without the policies of social distancing and medical policy management. Economics, medicine, bioscience, technology or anything is no longer isolated. There is always an economic angle. We have to find the winning formula to come out of COVID-19.

Economics of testing strategy

The countries who faced the pandemic successfully have one thing in common. Their testing strategy and coordination between policies has been incredible. New-Zealand, Vietnam, South Korea, Taiwan the unsung hero and even China have given absolute priority to testing. Ability to test has been discussed on various platforms in Sri Lanka. But still, the public seems to run on an attitude “This shall be passed”. Some tend to think opening up is the end of this battle, without weighing the pros and cons to the economy. Let’s face the grim reality we are not a rich country and the world doesn't want our currency, hence running the press in perpetuity is not a solution, it’s the opposite of it. Hence, the only viable economic option is to be at the helm of the new normal and “testing” will determine the shape of the new normal.  Sri Lanka did a commendable job in combating the wave 1. (Wave 1 is infected cases directly from China). We had a very successful quarantine process and all index cases (cases, where the person got infected, is traceable) at the beginning was identified and did not provide any space to progress onto community transmission (infected cases from small clusters of the population). In contrast, some developed countries like Italy and the USA were hit immediately with community transmission right from wave 1.

However, Sri Lanka has seen a sudden uptick in cases as a result of coordination issues between our social distancing policy and a few vital loopholes in our testing policy. At the beginning, the testing capacity was about 100 and to increase that limit to 1,000 we took a considerable amount of time. Testing even at this juncture is a limited resource, so we have to maximise the productivity on testing. We have to maximise resources to increase testing capacity, while also ensuring that we test the right samples while overall testing numbers are increased. That is where exactly we slipped (Advocata highlighted the loophole in the testing policy)

Source: https://www.worldometers.info/coronavirus/ (Accessed on 1st of May 2020)

Basic visual diagram to understand the initial testing strategy by the author

We took a fairly long time to increase the testing as it is yet not up to a reasonable level. We did not utilise the private sector from the get-go, even though it has critical capacity for lab tests in the island. Additional lapses in testing the forces who are a high-risk segment (as they manage the isolation on the frontlines) caused a sudden increase in infections. According to medical experts’ opinion COVID-19, some infected cases indicate symptoms (symptomatic cases) while there are many cases that don't indicate symptoms (asymptotic cases). However, they both are the carriers of the virus. On our testing strategy, since testing capacity is limited, we have to provide priority for individuals who are symptomatic and who have been contacted with a previously identified patient. In economics, we had the opportunity cost of not testing asymptomatic cases at the beginning. It is not that simple; there are some high-risk groups who arrived from overseas and some asymptomatic cases in quarantine centres. So maximising the limited resource “testing” became very complicated. We did not expect a member in the triforce to get infected and the possibility of their high-frequency commuting carrying the virus across domestic borders. Some of them having gone on leave to take a break after the yeoman service they delivered have now become part of the problem by increasing the probability of more cases in low-risk areas. Countries like Vietnam identified this loophole early and they conducted frequent tests among high-risk groups. Drivers, cleaning staff at hospitals and often committing all individuals all fall into high-risk categories.

Economics on increasing testing capacity

One main delay to increase the testing capacity was lack of engaging the private sector on testing at the beginning of the pandemic. Private sector labs are mainly run by major hospital groups that are well regulated by the Ministry of Health and have the critical capacity to get the numbers in. A PCR test is a confirmatory test (Symptoms have to be indicated and a doctor has to recommend the test) and an individual cannot get it as a screening test (a test to identify an infection/ disease). As a result, private hospitals can only conduct PCR tests for the in-house admitted patients only. Of course, the cost of the private sector tests will be higher but by restricting private sector to conduct the tests as a laboratory test and imposing price controls on the tests is a sure way of discouraging the ability to increase the testing capacity from volunteer testing. The outcome would be someone who could afford a test at a higher price will now utilise the state health apparatus, adding further strain on limited resources. At the same time price controls will discourage the private sector to invest and further expand testing capacity. In an ideal case scenario, the private sector has to be encouraged to conduct the tests out of hospital premises to reduce the degree of transmission of the disease. 

Given community infections being reported we can’t adhere to our previous testing priority strategy as now the asymptotic cases have been reported and the opportunity of voluntary testing has to be opened up. The cost of an economy that is idle is not bearable for a developing country like Sri Lanka.

Solution

The only solution lies in improving our testing strategy and increasing capacity. There were some locally made PCR tests reported which is commendable and we should encourage them to upscale it to a commercial level. However, introducing a commercial scale medical equipment takes time as the process needs extensive testing is needed for approvals to ensure accuracy and reliability of the tests. Increasing testing by using basic economics on what is available and more feasible. Having fewer regulations on the private sector on testing, while we maintain free testing conducted by the government is the first most economically feasible option. Engaging the private sector will save an opportunity cost of testing more cases in the government healthcare for people who can’t afford it. As community infections have been reported now voluntary testing ability is a must. Only the private sector is likely to bring the investment for advanced and convenient testing like drive through tests, and mass-scale testing needed for industry. To coexist with Covid-19 till the boffins at labs to come up with a vaccine is still in the distant horizon, hence increasing tests is the only way out to defeat the invisible enemy at the moment. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Curtailing liberty

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

Imagine a day in the life of a daily wage earner, before COVID-19. Of a woman who makes her living by providing cleaning services to several houses in Colombo.

She was free to take public transport, and on occasion a three-wheeler to get to work. She was free to take up or decline work and negotiate rates and days. She was free to keep cash, put some money in a bank and withdraw when needed. She could choose the vendors from whom she purchased groceries and other items.

It was no walk in the park. The work was hard, the madams were not always nice, the buses crowded… But she was able to feed her family and live her life. She could make small donations and participate in a seettu. She was not dependent on handouts or charity. She had liberty.

Now imagine her post-COVID-19 life. The money has run out, the jewellery is in the pawnshop. She cannot work, she cannot earn. April is burning hot, and her family is cooped up in a tiny tenement. Even when she has money, she cannot choose: she must buy whatever is offered at whatever price by whoever comes down the lane. She has to rely on handouts from the Government and from others. It used to be like this after the floods, but then one knew the water would recede and normalcy would return.

The curfew was supposed to be just for the weekend when first imposed. Now it has been over a month. Dates are announced and then changed for reasons unexplained. No one knows when this will end. Will she be welcome in the houses she used to clean? Will they fear her as a carrier of the disease and do their own cleaning? Will there be other work? She sees the streets are still being swept. Who should she talk to, how much is the bribe?

This is what the loss of liberty is for daily wage earners, for those whose work requires co-presence, those most affected by the curfew. The freedom to earn a living, to traverse public thoroughfares, to choose from whom to buy and what, to have some peace with the children out playing. All taken away by distant politicians and officials whose earnings are certain, who have no worries about food on the table when they are driven home by a chauffeur after a drink at the Hilton with a friend.

Let us concede that the lockdown (or its more severe version, the curfew) was needed to prevent the health system from being overwhelmed.

To save the lives of the elderly and those with weakened immunity. To buy time to get the tests and the acute-care beds and the PPE [personal protective equipment] organised.

The curfew was State action with significant positive externalities for society. Everyone benefited, including the daily wagers and the politicians. But the costs were not borne evenly. Those with the curfew passes and the Government vehicles may have borne none. Those among them who exercised discretionary authority may have even benefited.

The child who could not celebrate a birthday bore some of the costs. The executive who could not maintain the jet-black head of hair did too. But their costs were nothing compared to the daily wager cooped up in a tiny tenement without money to buy food and no certainty about what next week and next month would bring.

Giving these people money is not charity. It is compensation for the harm done to them by the State that dwarfed the benefits they received. It has been common practice to provide compensation when the State takes away assets or livelihoods. That is what has been done by the curfew.

When the State acts in ways that result in life-changing impacts on citizens (the curfew in this instance, but could also be allowing infected individuals to clear the airport), there must be accountability. There must be evidence that decisions were taken on the best available information and with best efforts made to minimise harms to citizens.

For this, two things are needed. The decisions must be taken under some written law and must be documented. There must be independent entities such as the Courts and the Legislature in place to examine the way the decisions were taken and with the power to hold the Executive to account. Do these conditions exist now?

The Acting IGP makes all sorts of announcements and arrests are made. But what laws are being broken by persons using public roads? What laws made by our elected representatives require shops to be closed?

Who decides what is essential and what is not? On what basis? Where are the emergency regulations? There can be no emergency regulations when an emergency has not been declared. There is no Parliament where questions can be raised, and the Courts are not fully functional.

A week of improvisation can be understood and forgiven. But now it’s more than a month. It is time to abide by the Constitution that all elected officials have solemnly committed to uphold. Perhaps we should consider requiring the unelected decision-makers to also take an oath of office, so they are reminded we live under law.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Let’s not look too far ahead

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

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By Dhananath Fernando

In cricket, most great batsmen will tell you that they don’t go out to bat thinking “I will score a century today”. They break their innings down to phases; “let’s score 10 runs”, “let’s score 20 runs”, “let’s survive the next four overs”, etc. Basically, “let’s face the next ball”. While this may be misconstrued as a lack of ambition, the underlying principle is that when you look too far ahead you can lose sight of the here and now. In cricket, this could mean getting out for zero while your mind is on the 100. Covid-19, the virus that found its origins in China, not only has Sri Lanka locked in its megalodon jaws but the entire world as well. While this too shall pass, we have to admit that we are well and truly in an unprecedented crisis. We will not be safe until the world is safe and that is the reality. Having faith that things will be back to normal soon is good but our actions should go beyond simply being optimistic and hopeful. Without beating around the bush, let’s be realistic and pragmatic by being scientific. In the past, we have relied on soothsayers who appear on television, devil dancers, turmeric (good luck finding turmeric, now that there’s a price control), and our love of bashing coconuts. The fact is that until we see the production of a vaccine or an acceptable solution, the entire human race is sailing in the eye of the corona storm. Many corporate dons and government officials in Sri Lanka have been pitching in with their business plans and strategies on what can be done “post-COVID”. Sri Lanka has faced the pandemic reasonably well compared to a few of the other countries, but in a crisis of this magnitude, in a closely connected world, the impact of a neighboring nation’s mishandling of the crisis can serve as a cautionary tale for the rest of the world. There is no point in early celebrations for doing well or having anxiety about those who may have mishandled the crisis, as we all are at square one and need to overcome this together. Sentiments on anti-globalisation and going back to the fallacy of “self-sufficiency” is not the solution as we failed that experiment comprehensively almost five decades ago. In a crisis of this scale, all predictions made will fall apart in a matter of not months but days. Take Sri Lanka as an example. We had all planned to open up the Western Province on 22 April but reported cases increased rapidly just two days before. How do we plan in an unpredictable crisis and what should we do is the question that has to be answered sensibly.

Historical examples may have limited relevance

As with managing any crisis, we generally make our decisions based on historic perspectives we have and connect with learnings from peers. First, we have to realise Covid-19 is an unprecedented scenario and how we managed previous crises will hardly help us to overcome the current battle. The strategies that worked for us in overcoming the Boxing Day Tsunami, fighting the brutal civil war against the LTTE, and overcoming the Easter Sunday bombings last year may not work in this battle against Covid-19. We are in a situation where every contract/agreement signed at every level has been challenged. It starts from a simple violation of a rent agreement, by not being able to pay the house rent on time, to a national-level crisis where we lack adequate foreign currency to pay our foreign debt commitments. Having seen the negative side, the reality is there will be a multitude of opportunities which will open up once the storm dies down. The challenge is the inability to predict the opportunities or the shortfalls. So when managing and strategising for the long term, a “one size fits all solutions” plan is very futile at this juncture. However, it doesn’t mean that we need to take a comfortable seat or take a “do nothing and wait” stance. Our game plan has to be pragmatic and dynamic. A game plan can be pragmatic if we have our basic fundamentals right. Predicting opportunities and developing strategies for a crisis without having the “basics” is similar to trying to solve an integration and differentiation mathematical question without having the basic knowledge of addition, subtraction, and multiplication functions. In a recent conversation with Advocata, Export Development Board Chairperson Prabash Subasinghe said it well: “This is a marathon, not a race.” At this point of time, it is of paramount importance that we have a strategy to float for the next 12-18 months and we have to play it dynamically and sail based on the direction of the wind. For the economy to stay afloat, we have to negotiate with the International Monetary Fund (IMF) for a balance of payment (BOP) bailout programme and request them to provide financial assistance to keep us afloat in the coming months. At the same time, we need to use our foreign office and actively seek bilateral loan facilities to manage the crisis. Import controls, liquidity injections, the Government taking over food distribution, and price controls are not at all advisable actions and they won’t help us to keep the rupee afloat, versus the dollar. Rather we will lose our dynamism and pragmatism and crush even the little credibility we have on markets.

The status of our basics

The next question is what can we do and what should we do to get beyond the floating stage. We have to evaluate the status of the basics and spend time on getting our basics right at this dark and stormy hour. Our fundamentals for sound economic policy have never been right in the last three to four decades. We should not lose the benefits of bringing hard reforms and getting the fundamentals right while we fight this crisis. For example, when pay cuts and job losses take place post opening up, people will actively look at part-time opportunities and work more to earn an income. At that point, if our business registration takes three months and if getting an online payment platform takes months for an e-commerce business to take off, the million opportunities created due to Covid-19 will be taken away by our neighbouring competitors. A study done by the Advocata Institute has found that registering a sole proprietorship is far more difficult than incorporating a private limited company. If we fail to fix that level of basic reforms (which can be easily fixed) we will not have any space to capitalise on the opportunities even if we get the support from development agencies over the next few months. Convoluted and complicated customs procedures and red tape have been discussed for years. South Asia Gateway Terminals (Pvt.) Ltd. (SAGT) CEO Romesh David, at a recent online forum on Sri Lanka’s exports economy with Advocata, said that even in the context of Covid-19, goods can cross borders and systems can be automated. If we are not ready to fix these basic regulatory barriers at Sri Lanka Customs, even our revised export target will be just an imaginary number. In summary, our strategy from a national level to that of a small business has to encompass the ability to float pragmatically as we are still in the eye of the storm. At the same time, we have to make sure to utilise our energy on getting our basics in economics right if we are to capitalise on the opportunities that will unfold when the storm is over. In difficult times people will be open to hard reforms and governments can spend political capital on getting hard reforms done. The Government should move back to their role as a facilitator rather than trying to become an active player and throw long-term strategies during one of the most serious crises in the history of mankind.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Polling amid a pandemic while preserving rule of law

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

As I let the contending views on how and when the General Election should be held wash over me, I am comforted by the fact that most participants in the conversation cite provisions from the Constitution. Those arguing that the Constitution is silent on the specific question before us, including the Elections Commission, want the Supreme Court to give a solution. In all, good signs that constitutionalism has not been abandoned. Constitutionalism is respect for words on paper that say what power holders can and cannot do; it is basically about the widespread respect for law; it is at the core of rule of law. In an essay I wrote just before the 2010 Presidential Election and then twice in 2015, just before the Presidential Election and then in a reflection on the Election and the subsequent 19th Amendment, I described the Sri Lankan polity as being torn between the default Kandyan feudal mindset and Constitutionalism. In 2010 we went one way and in 2015 the other way. Where will we end up in 2020?

Ending the impasse
The references to Articles of the Constitution by proponents of holding elections before the country returns to normalcy is obviously a good thing. It indicates that they place weight on what the Constitution says various entities can and cannot do. One hopes that the independent Election Commission will be able to navigate the rough waters ahead. They wished to seek guidance from the Supreme Court on the unanticipated situation the country finds itself in. But only the President can seek such interpretations according to the Constitution. The President’s refusal to serve as a conduit for the Election Commission has put the Commission in a hard place. What it can now do is to seek advice and assistance from the Attorney General and several independent counsel, recognised as eminent practitioners of constitutional law. The final decision will have to be made by the Commission. But the larger context is not conducive to optimism.

Why no emergency?
Let’s take the curfew and the various orders issued in relation to it. A curfew is a serious infringement of liberty. Millions have been prevented from engaging in their livelihoods; many have been compelled to draw down their savings and even pawn their valuables; businesses have suffered enormous losses; and so on. Thousands have been arrested for curfew violations. Let me be clear. These have been necessary sacrifices. I agree with the emergency measures that were implemented on advice from experts within Government on control of epidemics and from various parties including a trade union representing Government doctors. The success of the preventive measures may be seen by the relatively low incidences of cases (though it appears that South Asia is an outlier in terms of the disease). According to a recent report in The Hindu: “According to the latest figures, the eight SAARC nations account 1.1%, approximately of the world total of 2,265,727 coronavirus cases. In terms of fatalities, the SAARC total is half a percentage point or (0.49%) or 768 of the total of 155,145 people who have died of the infection.” This must be seen in relation to the fact that these eight countries are home to 21% of the world’s population. Yet, I am discomfited by the lawlessness of the anti-COVID-19 measures. In law-governed societies, the state does not violate the liberty of the citizens outside the powers set out in some form of written law. In countries that give primacy to the rule of law, actions necessary to deal with extraordinary events such as disasters, civil unrest and epidemics are taken under legislation that set out “states of exception” or states of emergency, which is the term used in Sri Lanka. The basic idea is that a piece of legislation defining the start and end of a state of emergency is approved by the Legislature and amended periodically as necessary. All actions during the state of emergency are taken according to emergency regulations promulgated under the law. These regulations are worked up by the Executive and need not be approved by the Legislature prior to coming into effect. But their very existence in written form allows the Legislature to modify or rescind them later and, most importantly, for affected citizens to challenge actions taken beyond what is permitted by regulation. Because of the abuse of the Public Security Ordinance, No. 25 of 1947, by various governments, especially by the 1970-1977 Government headed by Sirimavo Bandaranaike, the law was amended in 1978 to require monthly approval for the extension of the state of emergency by Parliament. Even though the ruling coalition in 1994-2000 had a wafer-thin majority, it managed to use emergency powers by going through this procedure month after month.

Absence of the rule of law
If ever there were circumstances meriting the declaration of a state of emergency, it is now. But the powers set out in the Public Security Ordinance are not being invoked. Curfews are being declared, people are being arrested, livelihoods are being affected, businesses are being closed and opened all without any specific authority granted by regulations promulgated under the Public Security Ordinance. And sadly, surprisingly, no one, including those who seek to represent the people at the General Election that is in contention, seems to care. No one is making a fuss about this fundamental disregard of the Rule of Law. This is why I am pessimistic about constitutionalism in Sri Lanka. The silence and implicit concurrence of citizens and opinion leaders indicate the dominance of the Kandyan feudal mindset. The King is all-powerful and can do anything. What need do we have for written law?

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Sri Lanka has to shift away from passive tests, to active, voluntary and targeted testing as curfews are lifted

Covered in Economy Next and the Daily News

By Fellows of the Advocata Institute

Voluntary testing, random testing of people in high-risk areas will increase the chance of asymptomatic index cases and members of clusters being discovered.

In dealing with the COVID-19 pandemic, Sri Lanka has been aggressively contact-tracing and later testing contacts of index cases that have turned up showing symptoms. Contact tracers in the health service and military have done a commendable job.

Initially, Sri Lanka did not test contacts of index cases as soon as they were quarantined and also did not test quarantined persons before release. But these are gaps that have now been closed.

In addition, tight curfews have been placed in the country for weeks, for any exposed person that the contact tracers had missed, including anyone who came to the country before March 19 when the airport was closed, to develop symptoms and come to the hospital.

Several large clusters including the Bandaranaike Pura cluster relating to an index case that returned from India on March 12, as well as the cluster from a case found in Suduwella Ja-Ela during curfew shows that the strategy was useful.

Source: Ministry of Health, Sri Lanka; Ministry of Health, Vietnam

Current Testing Strategy is Dependent on Symptomatic Cases

The current contact tracing strategy has a serious flaw in that it is too dependent on symptomatic cases and there is no way to detect an infected index case that is asymptomatic.

The best practice adopted in the countries with the most success is to trace at least three levels of contacts (F1, F2, F3) of an index case (F0). If there are confirmed cases at any given level, the next level is traced, quarantined and tested.

The longer the delay in discovering the index patient, the higher the chance that the disease has spread to multiple levels. Each level expands exponentially, therefore time is of the essence.

Contact tracers wait for index cases to show up in the hospital with symptoms to find the contact levels to kickstart the tracing process.

Authorities also wanted to get all index cases to state hospitals where they are able to exercise tight control and prevent further spread.

In a situation where tight curfew is imposed, this may be acceptable as the exponential expansion of new levels of contacts is stopped and the cluster is localized to where people can move around in houses close by.

However, it will not be the case when the curfew is lifted.

High-Risk Groups during Curfew and After

Even during curfew, there are several high-risk groups that may get infected. These are delivery personnel, postmen, drivers and cleaners of vehicles, as well as medical staff and cleaning staff at hospitals.

Once curfew is lifted, the front office staff of any institution including airports, quarantine workers, cleaning staff, people working in economic centres, and drivers may be exposed to higher risks.

Those in driving/delivery related jobs, in particular, would also be in a position to spread the disease faster and to a greater area.

After curfew is lifted the government could sample test people in high-risk areas.

These include front office staff of hotels or any company, cleaning staff, transport and delivery personnel, restaurant/supermarket workers, taxi, truck, and other vehicle drivers and sex workers.

Voluntary and private random testing

Sri Lanka has imposed a price control on PCR testing. This price control does not account for the costs of personal protective equipment, the cost of medical staff, and the safe disposal of medical waste.

If the concerns of authorities are that hospitals could get infected, testing and sample collections could be done outside of private hospitals.

Removing the price control would allow competition to drive the cost down, and would allow the private sector to expand testing capacity.

Opportunities should be provided for companies to negotiate bulk discounts and multiple validated testing points should be allowed. Companies and employees could be encouraged to share the cost.

To reduce the cost on the government, opportunities should be provided for voluntary testing and testing at the cost of the employer; especially for front office staff and sample testing of factory workers.

This way any index cases that have slipped through the net and any second contacts of index cases who have since recovered could be discovered.

Under the current testing strategy, there is zero chance of an asymptomatic person being discovered by authorities. Since the growth of a cluster is exponential, time is of the essence.

People may require a test for a variety of reasons.

Any individual who does not have symptoms but may feel that he/she was exposed due to going to a crowded place or any other high-risk location, that they have COVID-19 should have an opportunity to get a PCR test from at his or her own expense, preferably through a drive-through system.

Any individual who has to look after an elderly person or visit an elderly person may have a need for a test.

Many countries, including Korea, are already asking for pre-flight tests from foreign visitors. The current state testing regime there is no opportunity for anyone to get a test.

Drawing from the process adopted in countries like the UAE, results could be sent by text messages and other online methods. The same could be shared with authorities to construct a live map without burdening the public sector.

Sacrificing food security for self-sufficiency

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

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By Dhananath Fernando

The fallacy of a society that thrives on the myth of “self-sufficiency” after the colossal failure during the mid-70s that left nearly the entire population sans the ruling elite’s belly full is making the rounds again. The very definition of the term “self-sufficiency” has different meanings. One school of thought is going back in time to an era where Sri Lanka never existed on the international map with absolutely zero trade. In this instance, one had no choice as you live off of what you grow. Then there are the alternative arguments – the one that argues that one needs self-sufficiency to ensure food security; to be self-sufficient in food but import fuel, coal, medicine, raw materials, and other “essentials” as prescribed by the state. There are others who believe our trade deficit is beyond our means and we need to be self-sufficient to the extent of our export capacity. Out of all the arguments, the one on food security is the most popular. Hence, let›s take a look at data and definitions on food security and evaluate whether Sri Lanka can truly be “self-sufficient”.

What does food security mean?

The popular belief of “food security” is to have enough food for our consumption during a crisis. The present global COVID-19 crisis we are grappling with is a prime example. Another common myth on food security is having sufficient food stocks to last six months and the ability to produce the required calorie intake within the country’s territorial borders. The Food and Agriculture Organisation of the United Nations (FAO) and the World Food Summit have defined food security as follows: “Food security exists when all people, at all times, have physical and economic access to sufficient, safe, and nutritious food that meets their dietary needs and food preferences for an active and healthy life.”

Despite popular belief, to achieve food security, the country in concern need not produce the food it needs within its borders. The key is to produce the required food at scale and desired quality economically. Otherwise, we will waste our precious and limited resources. For example, take Singapore which has a land area of just 725.7 km2, compared with Sri Lanka’s 65,610 km². Singapore has topped the global food security index for the second year running, despite lacking commercial agriculture. This is because Singapore has integrated fully into the global food supply chain and constructed adequate storage to feed its citizens during external shocks. This is truly remarkable as Singaporeans can consume food that is, as defined by the FAO, safe, sufficient, and to the preference of the consumer. In comparison, Sri Lanka is ranked 66th in the same index. How can we ensure fellow Sri Lankans have access to food physically and economically at all times? According to the FAO definition, it is evident through the COVID-19 crisis that although we have food physically, our food security as a country has been hit by not having physical access to this food due to delivery concerns, people losing both economic and physical access to food due to the interruption of their daily wages, and the absence of food preferences. The failed socialism experiment adopted by the Bandaranaike Government failed to achieve any of the above. Food was inadequate, to say the least; choice was a dream and quality was never present. If a citizen was apprehended with anything more than that was rationed, it was deemed a heinous crime and he or she was promptly jailed. Flour was infested with bugs and rice with stones, and apparel was perfumed with the stench of kerosene and the risk of setting on fire those who were careless near the wood-fired kitchen stove. We had the longest queues in the world for the poorest quality of bread, and that too for only one loaf irrespective of the size of your family. In summary, for the urban community (where the majority had cash to buy food), food security was challenged by the absence of physical access and preferences, while the rural and estate communities’ food security was challenged by the absence of income and preferences as they consumed whatever that was available in their gardens or that grew in the wild. So it is obvious that food security is not something we can attain just by trying to be self-sufficient as there are so many other components to it such as access, affordability, safety, preferences, and nutritional value. According to FAO, the average daily per capita energy requirement per person is 1,680 kcal and Sri Lanka on average is at about 500 kcal above the limit, but according to census and statistics data, the energy intake in the poor segment across Sri Lanka is below world standards. So if we are serious about food security in the long run, we need to ensure our people can afford safe and nutritional food, maintain access, and ensure choice rather than living in the fallacy of self-sufficiency. To achieve this, we need to create secure access to the global food supply chains so that our people can afford the diverse range of food required to meet their energy intake (balanced diet). Then the next question one may have is whether this means that we are going to import all our food and whether we have enough foreign exchange to import all that we require.

Low agriculture productivity

To answer both aforementioned questions, we need to check why the productivity in our agriculture (sector) is low. The technology not reaching our paddy fields is the common excuse that has been given over the years. But have we thought about the reason why technology hasn’t reached the paddy fields? Out of 6.5 million hectares of land in Sri Lanka, 5.4 million hectares are owned by the government. As a percentage, private lands are just 18% of Sri Lanka’s total land extent. Farmers are required to take a permit from the government office if they are to cultivate a higher-yielding paddy. Access to a bank loan is very limited for most paddy lands as farmers are not given the title to the land they cultivate. No construction can be done on paddy land as it’s forbidden by law. Under the current regulatory regime, no investor would invest in a greenhouse farm or high-tech farm. In addition to the above, most of the paddy lands are fragmented, so the opportunity to scale up for a big operation is very limited, keeping costs of production high. This means that even if we were to go back to self-sufficiency and cultivate in our backyards, we have just a fifth of our entire land to cultivate, build houses, and do all other industrial work. This also means that we have about 25% of our labour force engaged in farming, but contributing only 7-8% to our GDP, which leaves most of our land unproductive.

Importing food and the trade deficit

Extreme self-sufficiency is not at all an option regardless of how resourceful we are, as it is obvious that we can’t produce all that we need – for example, fuel and machinery. The only way to keep our trade deficit narrow and convert it to a surplus is to develop our exports. Exports and imports are two sides of the same coin. We import products we cannot produce or products for which we do not have a competitive advantage. We export commodities and services where we have a competitive advantage. Following is an extract from FAO which summarises why food security can only be achieved by global collaboration: “Global food trade has to be kept going. One of every five calories people eat has crossed at least one international border, up more than 50% from 40 years ago.” Therefore, our inability and traditionally lethargic approach to developing our exports should not be a trade compromise for the real and meaningful food security of our people.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Covid-19 Policy Responses: A summary note to policymakers

By Advocata Institute

At the time of writing there are more than 1,300,000 cases worldwide and more than 74,000 deaths. Humanity faces a global crisis on a scale never seen before.  Health sector, security and emergency services personnel deserve praise and gratitude for their dedication.  

We offer the following for policymakers as input to make the difficult decisions in front of us as Sri Lanka deals with the COVID-19 pandemic.

To deal with the short-term problems, use existing mechanisms 

The government’s centralized and controlled approach to the delivery and distribution of goods has meant consumers, traders and producers have been squeezed at every node of the supply chain. In order to allow some parts of the economy to run at minimal risk, and reduce incentives for people to break curfew, the government should consider expanding the definition of essential services. 

Developing a non-reversible and consistent policy on curfews for supply chain actors, including delivery personnel, will ease pressure on consumers and producers who at the moment can’t get their products into the hands of consumers.  

A roadmap for reopening the economy

It is useful to think of the policy responses for the pandemic in phases. In the first phase the objective is to slow the spread of the virus by using a strategy of self-quarantine for much of the population by the way of curfew.  Yet the curfews cannot last forever, and they come at a significant human and economic cost.

As the short term emergency situation begins to settle,  policymakers should work with epidemiologists, security personnel, private sector and other stakeholders to develop a roadmap for re-opening. This will enable people and businesses to plan their activities effectively so as to mitigate the cost to their daily lives and business operations.  

An action plan for expanding testing 

The “trace - test - treat” method has shown to be effective in countries such as South Korea and others which have faced up relatively well to this public health crisis. The government’s decision on 31st March to expand testing to check for community transmission is a step in the right direction.

It is vital policymakers develop a clear and focused action plan to utilize the country’s existing testing capacity in government,  universities, research institutes as well as the private sector. The government can tap into private sector access to international supply chains and engage with potential donors to acquire and expand the testing capacity in the country.  

Re-examine the policy on wearing masks

Preventing a rise in cases will depend on individuals limited outings only to the essentials, practicing strict physical distancing and wearing masks. While the official stance of the WHO is that if you are not a medical worker and you are not ill, you do not need to wear a mask, it is also clear that this recommendation is driven by a global shortage of masks. Most recently, the United States of America shifted their stance, with their Center for Disease Control recommending general mask usage to lower rates of transmission. 

As such, while Sri Lanka should also prioritise mask supply for health care workers and others on the frontline on this crisis, the government should revisit its position on mask-wearing, and actively engage with the private sector to rapidly increase mask production.  

Letting the markets work

Re-visiting price controls and understanding their medium to long term impact

The government has already imposed price controls on a variety of items.  As research by Advocata Institute shows, even in normal times these controls mostly serve as political theatre,  with the government's own data showing many consumer items being sold at above the controlled rate. A  price is a signal wrapped in an incentive; it signals shortages and surpluses,  if a producer can’t make a profit they would not go through the trouble and risk of acquiring the item. In a lockdown,  price controls will only exacerbate the supply constraints.

In the coming months, price controls are a policy measure that should be avoided. 

Moving away from planned import restrictions

In an attempt to ease pressure on the exchange rate and protect the local agricultural industry, the government has announced the halting of all non-essential imports. As of the point of writing, this statement has not been substantiated by either the Central Bank or the Ministry of Finance, creating policy uncertainty. The introduction of a negative list of those items that will not be imported into the country in order to protect the rupee could be considered,  yet this should be a short-term, time-bound measure.  

Prolonged import restrictions and a government-imposed ‘essential lists’ will create ripple effects that will harm the welfare of consumers, producers and vital supply chains. The revitalization of our export industries and the manufacturing sector will be key to economic recovery in Sri Lanka. Intermediate goods and raw materials amounted to 46% of Sri Lanka’s imports in 2017, and long term import restrictions will hamper the ability of local businesses to recover and recoup losses after this crisis passes. This will also make domestic incentives favourable to non-competitive import subsidies. 

Moving towards a recovery 

Going forward, monetary policy and fiscal policy must work together well based on a credible macroeconomic program. While its effectiveness will be low in the short run due to COVID-19, it will signal a government committed to surmount the present difficulties.

The World Bank project of USD 128.6 million was much needed, and now having secured this, Sri Lanka should work towards a concrete engagement with the IMF. Apart from being a source of much-needed funding, an IMF programme will also bring fiscal discipline to the country. We should also actively explore engagements with the Asian Development Bank, with an aim to speed up the disbursement of existing loans. 

Overall macroeconomic policy should aim to keep inflation and current account deficit in the BOP sustainable, as this would create the necessary environment to undertake real sector reforms. Trade reform to ensure the free exchange of goods and services, and domestic regulatory reform to help businesses recover and restart should be priority areas of focus.   

Private sector participation in the path to recovery is crucial. Clear, consistent engagement with independent-minded experts, and including these individuals in an advisory capacity to the Central Bank and Ministry of Finance would lend credibility to the government, and signal that Sri Lanka is serious about laying a strong foundation for a healthy economy.

READ COMPLETE POLICY NOTE.

Attracting foreign exchange: Are we on the right track?

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

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By Dhananath Fernando

What should be our mandate for the coming Sinhala and Tamil New Year? We have to be psychologically prepared to work harder and develop the ability to drive and lead in the best of times as well as the worst of times that are about to dawn on the horizon. Amidst the COVID-19 battle and a quarantined Sinhala and Tamil New Year, the recent figures by the Department of Census and Statistics indicate that our per capita GDP for the year 2019 (which is a reasonable measure to evaluate the standard of living) is at $ 3,852 per annum, a drop from $ 4,079 in 2018 (In USD terms, this is a 5.5% drop compared to 2018 and a 3.9% increase in LKR terms). In 2015, our GDP per capita was $ 3,842. In USD terms, we have pretty much slipped to where we were five years before.

Just to bring our performance into perspective, Japan’s GDP per capita is around $40,000. The standard of living in Japan is 10x as Sri Lanka. Our GDP growth rate is estimated to be at 2.3%, another 0.3% drop from the initial estimation of 2.6%. What this means is Sri Lanka will take 30 years to double our living standard if we are to move at this pace. And even then, we will be falling 5x behind Japan’s present standard of living. We are heading towards a difficult and challenging time period with a bad start. We can overcome this only by working together locally and forging partnerships globally. We have to find opportunities in this crisis and navigate by adding more value to our goods and services which the global market seeks. Our mandate in this New Year should be to be competitive, serve market opportunities, and capitalise on the limited opportunities before us. However, this is easier said than done. In this context, the decisions we make and the messages we push will determine where we are heading towards and the fate that awaits us in the not-so-distant future.

Measures by the Central Bank

It is no secret that Sri Lanka requires foreign exchange to pay back our import bills and the loans that we have taken. We import almost double what we export, hence the balance in the current account – or in common man’s term, imports exceed our exports. This trade deficit has to be narrowed, and this is the challenge. Over the years, instead of implementing the required reforms to make our exports more competitive and to close the gap, our constant strategy has been curbing imports to narrow the trade deficit. Today, we have arrived at the point of no return. With little growth in exports and debt beyond our means, the Sri Lankan taxpayer has racked up debt of about $ 16 billion payable by 2023. The Government took to implementing a futile policy of banning the importation of non-essentials including vehicles. Our rupee has depreciated nearly 70% over the past decade. On 8 April 2020, the Sri Lankan rupee passed 200 against the dollar. Given the ongoing crisis, we are left with few options to save precious foreign reserves as raising money from the market at the present risk premium is almost impossible. However, data indicates that the Central Bank continues with quantitative easing – printing money or adding more money into our financial system – which is the main reason for our currency to depreciate. On 24 February 2020, the Central Bank of Sri Lanka made a Rs. 24 billion profit transfer; on 13 March, the Central Bank injected Rs. 50 billion by buying government securities; and on 17 March, the Statutory Reserve Ratio (SRR) was brought down to 4% from 5%, which injected a further Rs. 50 billion to the Sri Lankan economy. The meaning of the statutory rate cut is that all licensed commercial banks earlier had to maintain a mandatory reserve of 5% of their total deposits with the regulator (deposit liabilities), but now have to maintain only 4%. This money will most likely be utilised towards relief measures provided by the Government. As we continuously highlighted in this column, the Yahapanala Government made the same mistake of imposing import controls and providing cash injections to the system, which resulted in the rapid depreciation of the rupee. The value of the rupee is a market function and trying to distort (it) by intervention is not advisable. In this case, with the devaluation of our rupee, the prices of food and medicine will go up, thereby increasing poverty levels.

Appealing for foreign currency deposits

On 2 April 2020, the Governor of the Central Bank appealed to domestic and international well-wishers on behalf of the Government of the Democratic Socialist Republic of Sri Lanka to deposit foreign exchange into Sri Lankan banks with an assurance that no questions would be asked on the financial trail of the funds. In the appeal, the Governor of the Central Bank mentioned that the money would be accepted without any hindrance from the Central Bank and the banking system and will be exempted from exchange control regulations and taxes for three months from 2 April 2020 onwards. At the point of writing this article, the Central Bank has not published further guidelines; only the statement by the Governor is available. However, it is of paramount importance that these measures do not impact Sri Lanka’s ratings by rating agencies as this would further erode our capacity to work with international donor agencies and financial markets. We have to be cautious not to open space for money laundering while we take decisions at this serious moment to attract more foreign currency. As a result of the serious efforts by the Central Bank of Sri Lanka, we were delisted in the grey list of the Financial Action Task Force (FATF) in October 2019. The FATF is the global policy setter on anti-money laundering and countering the financing of terrorism. A delisting from the FATF grey list is a positive indication to the market to attract quality investments which look for a credible financial system. At the same time, we have to be vigilant not to breach the code of conduct and ethical guidelines of international donor agencies, as there is a high possibility of Sri Lanka knocking on their door as a fallback option. In 2001/2002, a similar tax amnesty scheme was brought by then Minister of Finance K.N. Choksy and the proposal was reversed soon after the new Government was elected in 2004. There are no short-term solutions to mitigating long-term macro issues. Time and time again, it has been proven that curbing imports is not the solution and monetary prudence is the way to stabilise the rupee. The motivation behind these measures is understandable as our foreign exchange income is very tight, but in this new Sinhala and Tamil New Year, we must ensure the cure is not worse than the illness.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Sri Lanka’s weak public finances will exacerbate economic shocks from COVID-19

Covered in the Daily News and published in the Daily FT, Lanka Business Online and LMD

By Fellows of the Advocata Institute

The country will have to borrow heavily and go in for a new IMF program

Sri Lanka’s shaky public finances are about to receive another blow from the fallout of COVID-19. The most crucial aspect of a pandemic is always the human cost, but the spread of the virus has important repercussions for the economy. Studies indicate that pandemic impacts a country's economy through several channels, including the health, transportation, agricultural and tourism sectors. As borders are closed and global markets slow; trade is impacted, so exports suffer.

Sri Lanka’s already-battered tourism industry will be further hit  and the order books of some of the key exporters will suffer in the next quarter.  As international supply chains contract exports may remain constrained, even when markets reopen as components and raw materials may remain in short supply. The supply chain impact will affect even domestic producers as imported raw materials run short. Agriculture depends on imported fertiliser, pesticides, planting materials and chemicals. Local factories source raw materials, components and spare parts from overseas and may be unable to work at full capacity.   

As cashflow dries up and debts mount, many businesses will find it difficult to cope. During the global financial crisis of 2008/10, an estimated 90,000 Sri Lankans lost their jobs due to downsizing amongst manufacturing firms, especially in the apparel sector. The impact of the current crisis has the potential to be worse because unlike the financial crisis, this pandemic is not confined to advanced countries. Developing countries were affected due to the loss of export markets but their domestic markets were unaffected. This pandemic is affecting both developed and developing countries.  Daily wage-earners will see their already uncertain incomes further dampened. Small businesses will be among the hardest hit.  

This would mean that growth will slow further. The budget deficit will take a double hit from falling revenues and increased expenditure. Lower levels of activity mean lower levels of tax collection. As sales and imports decline, the collection of VAT and import taxes will decline. As business profits fall, income tax collection will fall. Meanwhile, government spending on health (from testing kits to hospital costs) and relief measures will rise in response to the pandemic. The budget deficit will thus widen and the government will need to borrow more.  Sri Lanka’s interest bill this year alone will be Rs 1 trillion.

Even if public finances were robust, this would pose a significant challenge, but Sri Lanka’s finances --  sickly to begin with -- were weakened by recent tax cuts. The fallout is difficult to estimate but a recap of the principal issues is useful to assess the available policy options.    

Sri Lanka obtained an IMF facility of US$1.5bn in June 2016. This is the 16th instance when it turned to the IMF since joining the fund in 1950 - an indication of the systemic and long-running nature of the underlying problems. The overall objective of the recent IMF programme was to “reverse a two-decade decline in tax revenues and put public finances on a sustainable medium-term footing”. The programme aimed to increase government revenue to reduce the budget deficit and therefore the public debt (as deficits fall, the need to borrow reduces). 

In the popular imagination, IMF programmes are associated with austerity: cutting government expenditure which negatively impacts social and welfare spending. The reduction in expenditure closes the budget deficit at the expense of the welfare programmes. Under the previous ‘Yahapalana’ regime, Sri Lanka did the opposite: increasing taxes to cover the deficit. Expenditure was left untouched and in fact, continued to increase.

Unfortunately, the bulk of government revenue comes through the form of consumption taxes particularly VAT, so much of the burden of increased tax fell on the general public anyway, provoking intense displeasure. Income taxes were also increased, angering the business community. The government thus succeeded in antagonising a remarkably diverse set of constituents and became exceedingly unpopular.

Public finances did improve somewhat but were never very strong. With the attacks in April 2019 things started to slip again.  The IMF review in November 2019 noted that “the fiscal targets are no longer within reach, due to the significant revenue shortfalls”.

Following the Presidential election of November 2019, the new government announced sweeping tax cuts in December. Given the unpopularity of the tax increases, responding to public frustration could hardly be faulted,  but the breadth of the cuts was astonishing. Corporate income tax was reduced from 28% to 24%,  VAT was halved from 15% to 8% with a high vat-free threshold;  withholding tax, nation building tax and economic service charge were scrapped. The objective was to kickstart a floundering economy but the cost –around a quarter of government revenues or 3-4% of GDP destabilised public finances.

On 7th February 2020, the IMF noted that: “Preliminary data indicate that the primary surplus target under the program supported by the Extended Fund Facility (EFF) was missed by a sizable margin in 2019 with a recorded deficit of 0.3 percent of GDP, due to weak revenue performance and expenditure overruns”. According to the fund, Sri Lanka’s 2020 budget deficit could rise to 7.9% of GDP, the highest since 2015. Given the pandemic,  this will look optimistic. The reported deficit for 2019 was 6.5% but according to the Ministry of Finance “the actual budget deficit for 2019 should have been over 8 per cent” as around Rs.367bn of expenditure remained unpaid and unaccounted at the year end. 

Meanwhile the rating agencies Fitch and S&P downgraded the outlook on Sri Lanka’s debt to ‘negative’ from ‘stable’.   Sri Lanka’s already wobbly public finances must now cope with the added economic shock of COVID-19. 

Dealing with the public health emergency and the associated human cost should be top of mind for policymakers. Yet clear-eyed economic thinking will be equally important and will have a direct bearing on the human cost, particularly for our society’s most vulnerable.  This is why weighing the relative costs of a lockdown or a complete curfew is important. 

The biggest headache for the government will be managing foreign debt. The Central Bank’s freshly minted medium term debt strategy is based on assumptions that no longer hold -- 5 percent GDP growth over the medium term, inflation of 5 percent and a budget deficit of 3.5 percent. With the medium term strategy in ruins can the government rollover the maturing debt? 

Gross reserves stood at US$7.9bn equivalent to 4.6 months of imports in February 2020. External debt repayments are around US$5.6 bn in 2020. This has been partially refinanced by a US$500m loan from China which has reportedly promised a further US$700m. The country will be looking to raise a further US$2-2.5bn at least if it intends to repay this year’s debt while maintaining a minimum reserve of three months imports.  

With its public finances in shambles, the IMF programme derailed and inevitable debt downgrades expected from rating agencies it is impossible to return to the market to borrow. The yields on Sri Lanka’s sovereign bonds maturing this year have spiked.  At the time of writing, investors were asking for a 101 percent increment on the current yield, bonds maturing next year are at 44%. A new IMF programme will restore confidence to the markets but that would mean a return to painful tightening. Appealing for further bailouts is thus the most attractive option.

Sri Lanka is among the countries that have called for debt relief. The call has been supported by the World Bank and the International Monetary Fund (IMF). Although the call is for the poorest of countries,  there are signs that these organizations will consider countries recently transitioned into upper middle income category like Sri Lanka. Some commentators have even suggested that the government should simply default.  While this may appear simple, it is risky and even restructuring of commercial debt: deferring or reducing repayments is viewed by the markets as a default event, which means it will be difficult to return to the markets for a while. It also delivers a shock to the economy with declines in GDP, investment, and private sector credit being common. The financial sector may be affected leading to bank failures.

An IMF study in 2002 covering restructurings by Russia, Ukraine, Ecuador and Pakistan in 1998-2000 showed as a result of the restructuring:

 “The decline of real income and financing was transmitted to domestic demand. Confidence plummeted and private investment was curtailed sharply. Private consumption followed, albeit with a lag, as for a while households drew down their available savings. Public consumption was also scaled down reflecting efforts to consolidate public finances. Despite exchange controls, exchange rates depreciated sharply reflecting the shortage of foreign funds resulting from capital flight. The domestic demand contraction and import substitution helped improve current accounts. The exchange rate depreciation passed quickly to prices and inflation surged. Wages lagged, inflation wiped out the value of deposits, unemployment rose, and households suffered significant real income losses.”

Sri Lanka thus finds itself in a tricky position with little room to manoeuvre.  These problems are not due to COVID-19 alone, although it has made matters much worse.  The pandemic has only precipitated the policy weaknesses that were building up over decades into a single giant shock encompassing growth, fiscal and external sectors at the same time. 

This was also the case in the countries in the IMF study referred above where following a relatively short history of access to international capital markets, the macroeconomic situation was destabilised by domestic policy shortcomings and exogenous shocks: weak oil prices for Russia and Ecuador, international sanctions following nuclear testing for Pakistan, the El-Niño effect for Ecuador, Russia’s turmoil for Ukraine, in addition to an unfavourable external environment after the Asian crisis.

In the short-term bailouts will be necessary,  but it is only a temporary measure, postponing the issues for a later but not too distant date. Whilst further bi-lateral loans from China are a possibility,  given the global nature of the COVID-19 crisis, further bi-lateral aid may not be a realistic option. With it’s $1 trillion lending capacity, an IMF program provides perhaps the only realistic option to access further borrowing.  

Politicians and citizens who have been living in a state of denial must wake up to the grim realities. Pre-election bravado and long touted conspiracy theories must give away to level-headed thinking and negotiations with global financial institutions. Economic management should be done in consultation with all other statutory agencies that are empowered to play a role. 

Mistakes could be costly and run the risk of turning the COVID-19 outbreak from a severe public health crisis into a devastating economic crisis.  

Containing, reactivating, and managing: Sri Lankan economy’s triple challenge

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

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By Dhananath Fernando

There are many questions wafting around and these questions need solutions. In a crisis, we may not have the perfect answers for most of our questions, but we have to keep our eyes open for alternatives. The problem at hand requires a wider social discussion and ideas for pragmatic action within our capacity which fit the current context.

Problem 1:

Containing the spread of the virus as well as ensuring food and other essential supplies reach 5.3 million Sri Lankan households is the need of the hour. An urgent day-to-day operational strategy is required and this needs to be complemented by fast decision-making at a macro level.

Problem 2:

Re-activating the economy and covering the losses due to the lockdown. This too requires a short to medium-term strategy and poses the most challenging task.

Problem 3:

Managing macro-level financial commitments and stabilising the economy. The third problem requires diplomatic relations alongside negotiation with international donor agencies and bilateral international partners.

Problem 1: Economic angle of stopping the spread of the virus and providing essential supplies

According to the World Health Organisation (WHO) and health experts, testing as much as possible followed by contact tracing of the positive cases is the recommended formula for success. “Trace, test, treat,” they say. However, this approach may change depending on the phase of the pandemic. According to the Government Medical Officers’ Association (GMOA), Sri Lanka is at the third phase where cases from the community or small clusters have been reported.

Other countries have succeeded in using the testing method, with South Korea being one such example. They organised drive-through testing facilities and centres and now have the distinction of being the country to have conducted the most number of tests for Covid-19 per million people. (Sri Lanka has currently tested only 2,277 cases, or 87 per million people. Countries such as South Korea have tested 410,564 cases or 7971.04 per million people.)

They also came back strongly following the Patient 31 incident (a patient who attended a religious observation with a few thousand people, causing a sharp rise in the reported cases of Covid-19 in South Korea over a short period).

To increase the testing capacity in Sri Lanka, the Government opened testing facilities for the private sector under the condition the tests can only be conducted for in-house patients and would not be conducted as a laboratory operation. However, Vidya Jyothi Prof. Vajira H.W. Dissanayake highlighted the need to have more collaboration with private hospitals and university laboratories in order to scale up Sri Lanka’s testing capacity.

This same recommendation applies for the distribution of food and essential items to households. The Government setting up a new delivery channel at this point in time will be costly. The faster route is to utilise the existing private sector delivery channels to distribute food from farms to households. The Government’s initiative in partnering with existing food delivery companies is a move towards the right direction. We need to expand more from farmers to wholesale shops and wholesale shops to retailers.

As a piece of advice, the Government should not move in the direction of imposing price controls on vegetables to avoid market shortages, which we are currently experiencing in the case of tinned fish and dhal. The Government should refrain from setting up price ceilings or making promises to the farmers to buy all the vegetables in the market as this will distort the price elasticity of supply and impact the quality of the produce, as well as negatively impact small businesses, delivery channels, and small newly formed ICT (information and communication technology)-based food supply operations.

Problem 2: Reactivating the economy

Reactivating the export businesses requires recovery in international supply chains and production networks as well as recovery in the local economy. It was estimated that during the global financial crisis in 2008/10, Sri Lanka lost about 90,000 jobs. The global financial crisis was confined to one part of the world and we felt the impact of secondary shocks.

The Covid-19 pandemic has affected almost all countries and so a serious impact can be expected. Providing a stimulus package or giving the option for EPF (Employees’ Provident Fund) members to take 20% of their money have been put forward as proposals.

The important focus is to have businesses with the capability of bringing in foreign exchange as this has become the need of the hour. We have had high hopes for the tourism sector and have invested resources into this sector, including a campaign with international media agencies to scale up the industry from $ 4 billion to $ 10 billion.

For this year, our hopes on tourism have been dashed given the obvious global dynamics. In export industries, there are no short-term solutions and the Government has allowed a special pass system to operate certain export industries. Having working capital for export industries to operate till the markets come back to normalcy has to be the priority, and next, reforms on export development to improve competitiveness must be the long-term game.

As a suggestion post-Covid-19, we can declare a six-day work week to compensate for possible losses. The Government can consider declaring some holidays as working days, providing space to observe one’s religion on religious holidays.

Problem 3: Managing macro financial commitments and stabilising the economy

It is evident that the Central Bank and our economy is at an absolutely serious juncture of not having adequate foreign exchange (or US dollars in layman’s terms) to pay for our imports and settle upcoming debt repayments.

Central Bank data indicates that it has sold about 12 tonnes in gold reserves. On Thursday (2), the Central Bank announced the halting of imports except essentials, pharmaceuticals, and fuel. They further made a public appeal to deposit foreign currency in the Sri Lankan banking system and that all deposits will be exempted from exchange control regulations and taxes.

While we expect well-wishers will bring the money back into the system, it is critically important that the Government negotiates bilateral loans with neighbouring and supporting countries. Unfortunately, all countries may require urgent cash injections, but given the size of our economy, there will still be space for negotiations, hopefully with no strings attached.

In the meantime, we need to negotiate our loan repayment plan and reschedule wherever possible with international donor agencies. The near-zero interest rates in the US will provide further space for rescheduling.

Finally, as a fallback option, the Government has to start discussions with the International Monetary Fund (IMF) for a bailout programme to support our debt repayments of more than $ 5.8 billion this year and approximately more than $ 8 billion from 2020-2024.

Submission to the Expert Committee to Evaluate the Millennium Challenge Corporation

In April 2018, Sri Lanka was awarded a compact grant of USD 480 Mn by the Millenium Challenge Corporation. The Millennium Challenge Corporation (MCC)Compact presents Sri Lanka with a much-needed source of funding and should be accepted without further delay. The Government of Sri Lanka has been a part of this grant process and has recognised the issues of transport and access to land, and the constraints they place on growth.

READ THE COMPLETE REPORT

The other side of the Government’s relief measures

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

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By Dhananath Fernando

This has not been an easy time. We are moving through the third week of Covid-19 in Sri Lanka following the identification of the first local patient. Medical experts have advised us to continue social distancing in the critical weeks to come. Fortunately, no deaths have been reported so far and a few patients have successfully recovered as of 27 March 2020. That’s a big relief. I am sure no Sri Lankan ever thought that one virus could have caused such damage, but it has.

According to the Government Medical Officers’ Association (GMOA), we are in the third phase of the crisis. The Government and healthcare experts are doing a commendable job of putting a stop to the spread of the virus. This covers the healthcare side of the matter. The other side of the coin is the economic management that must complement healthcare measures.

As we are still in the eye of the storm, the short-term consideration of having enough essentials to put food on the table has been the focus. Before the spread of Covid-19, the Government announced a new direction on delaying debt collection and tax collection across different economic sectors for state and commercial banks, which included providing a moratorium for settling personal loans and vehicle leasing instalments. At the same time, the Central Bank directed banks to halt the provision of facilities to import vehicles and non-essential goods amid the value of the Sri Lankan rupee falling to a record low. On Thursday (26), the President requested that international agencies restructure debt repayments for countries that are most vulnerable, like Sri Lanka.

The Government’s relief package and the measures needed should be assessed based on the cost that the crisis cause our economy.

Measuring economic impact

In my opinion, when measuring the economic impact on our economy, we can zoom in on four sections. Since we are still riding out the storm, it will be too early to make an accurate estimate of the impact, but we can keep tabs on the matter. I have considered only variables that are measurable, leaving aside the cost of human lives; nothing is more valuable than the life of a fellow human being.

The cost associated with battling disease

For an $ 88 billion economy, and a country with a high debt-to-GDP ratio, the unexpected cost of healthcare and pandemic management falling in a critical year for debt settlements can have severe consequences. The setting up of quarantine facilities, attempts at expanding hospitals to battle Covid-19, and concessionary packages that have been provided for the most vulnerable segments in society are the main cost centres that fall within this category.

The cost due to loss of productivity and economic activity

Not every person can work from home, and the loss of productivity in agriculture, industry, and services will cost Sri Lanka as significantly as other economies. Our low economic growth amidst the tax cuts that were provided earlier this quarter further highlight the seriousness of this matter.

The loss due to the barriers on economic integration 

The costs incurred by industries and the economy due to the disruption of economic integration are the final section that should be considered. Consumption will be very low in key European markets and in the US (our main export markets that contribute to about 35% of our total exports), which will affect demand. On the supply side, the time taken to replenish supply chains from China and other countries, especially for the apparel sector, will further impact our economy, as well as the rest of the world.

Import controls are not advisable

Many governments across the world announced stimulus packages for their economies. In Sri Lanka, the Central Bank gave directions to halt the importation of non-essential goods. This was taken as a measure to defend our currency and to bring our import bill down, but there is very little empirical evidence supporting the defence of a currency through import controls. In the Sri Lankan import basket, about 9% accounts for raw materials, another 38% for intermediate goods, and about 21% for capital goods. Petroleum is the main import, followed by raw materials for the apparel industry. Pharmaceuticals are included amongst the 30% of consumer goods imported.

Imposing import controls in the first place in defending the currency gives a wrong signal to industries and investments at a time when we need them the most. Similar measures taken by the previous Government and other governments in the past ended with the rapid deterioration of the currency and, ironically, the reserves that were used to defend the soft peg. We have to back our currency with precious metal such as gold (gold standard) or a stable currency, which is called the hard peg (a fixed rate, normally with a hard currency like the US dollar), which can be managed by a currency board (we currently run a soft peg where money can be printed without being backed by hard currency). Most developing countries shun currency boards as it imposes monetary and ultimately fiscal discipline. In the meantime, it is indicated that the Central Bank has printed about Rs. 100 billion between 13-24 March 2020 and this will be the main reason for the currency to fall further.

Secondly, an essential good for one person may be a non-essential good for another person, and vice versa. For example, a can of tinned fish may be essential for one household but for a vegetarian household, it would not even be considered an option. Many similar cases arise when governments try to intervene in defining essentials and non-essentials.

Difficulties in targeting the informal sector

In the Government’s stimulus package, a systematic targeting concern arises regarding the informal sector in the economy.  Most businesses operating in Sri Lanka fall within the micro, small, and medium sector, and a considerable amount are not registered. The Government will not be able to capture these under any stimulus package, so we have to be prepared for the impact it will have on our economy. Small-time tailors, barbers, car mechanics, fruit and vegetable sellers, furniture shops, and many businesses operate within this informal sector. They do not operate within the system of formal bank facilities through commercial banks or non-banking financial institutions (NBFIs). Instead, many work with loan sharks with loans having interest rates of 10-12% per month with an efficient collection system and a 100-day repayment period with interest and capital. For example, if I take a loan of Rs. 100,000 with a 90-day repayment period at 10% monthly interest, there will be a collection representative every day in the evening at my doorstep and I have to pay 1,500 daily (1500*90 = 135,000). In Moratuwa, where I live, where the furniture business is the main industry, I can just walk in with a cash cheque dated for three months and even get a couple of millions in less than 15 minutes. There are separate cheque collection shops in my area. Therefore, the Government will face the challenge of targeting this stimulus package to minimise the cost of loss of productivity, particularly in the informal sector.

In summary, there is an “announcement effect” and a confidence effect created by the relief package announced by the Government among the people who are not a part of the informal economy, but policymakers should take note that there are also vulnerable sectors that shoulder a large portion of our economy which has an impact on our daily life.    

Lock-downs need not be curfews

Originally appeared in Daily FT, Daily Mirror, Lanka Business Online and Economy Next

By Aneetha Warusavitarana

On March 12, the World Health Organisation (WHO) declared the new coronavirus, COVID-19, to be a pandemic. With cases in Sri Lanka reaching over a 100, the government of Sri Lanka has taken several measures to prevent the spread of this disease. One such measure was enforcing an islandwide curfew.  

The risks posed by COVID-19 to the health and safety of our population are considerable and the measures to prevent the congregation of people and spread of the disease are commendable. A lockdown may certainly be warranted, yet a highly restrictive and prolonged curfew may prove to be counterproductive. As witnessed on Tuesday, March 24,  the short window given for basic necessities such as groceries,  medicine and other supplies, proved to be not only inadequate but also counterproductive to the objective of imposing a curfew in the first place. 

The government lifted curfew from 6:00 a.m. to 12:00 noon, allowing people to purchase their essentials. This temporary lifting of curfew highlighted the flaws in the solution. With limited information as to when the next curfew would be lifted, people panicked and shops were inundated. It was not unusual to hear of someone who stood in line for six hours, practising social distancing, only to enter a supermarket that was crowded with people and filled with empty shelves. Crowds were so great that the fear is that the number of infections in the country will now rise in the weeks to come. 

Planning the shopping of an entire country or even one province is not an easy task and right now, people do not know when the curfew will be lifted next. As of Wednesday (March 25), curfew in Colombo, Gampaha, Kalutara and Jaffna has been imposed indefinitely – there is no wonder that there was panic buying

Limited information exacerbating problem
Limited information on the government’s next steps is making the problem worse. The inherent problem with a curfew is that it cannot be imposed indefinitely. People need to have access to essentials – their food and their medicine. The curfew itself was imposed with almost no prior warning, which meant that the population panicked, hitting the shops and buying groceries that far exceeded their immediate requirement.

While this hoarding of goods has been publicly criticised, one can understand the fear that drives this behaviour. Planning the shopping of an entire country or even one province is not an easy task and right now, people do not know when the curfew will be lifted next. As of Wednesday (March 25), curfew in Colombo, Gampaha, Kalutara and Jaffna has been imposed indefinitely – there is no wonder that there was panic buying. 

The government’s solution to this issue is to allow delivery services to run, while also organising a government-led distribution system of essentials to all families in these areas. The Presidential Task Force will coordinate this effort, mobilising the ‘grama niladari’, divisional secretariat, agricultural officers and ‘samurdhi’ officers.  The motivation behind this is commendable. The question that remains is whether this will be feasible and whether this is where the government should be dedicating limited resources.

Is there a more effective alternative?
The government has reassured the public, stating that there are no food shortages in the country. Empty shelves in the supermarkets are simply a result of panic buying and this appears to be true. A model that has been deployed in other countries with some success is the implementation of a lockdown and not a curfew. 

Under a lockdown, essential services such as banks, grocery stores, supermarkets, convenience stores, pharmacies and food delivery services, remain open. People are allowed out of their homes to purchase groceries, etc. with strict guidelines on social distancing being enforced.  

The government has already taken steps in this direction, with pharmacies and commercial banks remaining open and delivery services allowed to run. The next step would be to include grocery stores and supermarkets under the category of essential services. 

Looking at the example of South Korea, a success story in the handling of COVID-19, the South Korean government did not enter a complete lockdown. The government instead allowed limited movement of people but rapidly expanded their testing capacity, which helped drop the rates of infection.  

There is the concern that as Sri Lanka’s testing capabilities are not comparable to that of South Korea, we may not be able to replicate their model with an equal degree of success. 
There are other models that we can be considered in this case. In America, stores have allocated separate hours for the elderly to shop during, in order to limit exposure for this vulnerable group of the population. In New Zealand, where a little over 200 cases have been reported, the country has entered lockdown, allowing only essential services to run. 
Given the issues we have seen with curfew in Sri Lanka, the government could consider a variation on a traditional lockdown, where people are allowed to access essential services – with limitations on the number of people who can enter a shop at a time or allocating time slots for people to purchase goods. This could free up government resources currently being allocated to mass food delivery and allow these resources to instead be utilised in our healthcare sector. 

Social distancing but economic convergence

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

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By Dhananath Fernando

The novel coronavirus (Covid-19) has taken the entire world by surprise. For Sri Lanka, this is the third time in recent history we’ve had to fight a non-terrorist enemy. Firstly, the 2004 Indian Ocean tsunami crashed on our shores, then a dengue outbreak a few years ago, and now this virus. Simultaneously, we had a 30-year-long terrorist war, followed by the Easter Sunday attacks just under a year ago. In summary, there seem to be more national emergencies than ever before.

During crises of this nature, sentiments are expressed that isolation as a country and self-sustenance are the best solutions to avoid such external shocks. It is natural to jump to this conclusion when our survival is threatened by such external factors.

However, a good story to remember at this time is one from the Buddhist Jathaka story “Sammodana Jathaka” – the story of the hunter and the flock of birds. The hunter was a threat to the flock of birds and the birds kept flying in individual directions and getting caught in the hunter’s net. After this happened a few times, the birds strategised; all flew together in the same direction towards the net, dragging it with their beaks towards a tree, and escaped. Although it seems that economic isolation, self-sustainability, and de-globalisation are the solutions, the reality is that in a world more interconnected than ever before, it is the opposite.

Economic hit

The impact of Covid-19 is unique since this is a global challenge. The economic impact of Covid-19 would be severe, both locally and globally. On the demand side, due to the closing down and locking down of cities, there will be a drastic drop in consumption. On the supply side, there will be a steep drop as the world’s factory, China, which contributes to 16% of the world’s GDP, has been severely impacted and supply chains and production network linkages are dysfunctional at the moment.

For Sri Lankans, our apparel trade will be at risk due to lower consumption in international markets (Europe and America), being unable to continue operations for the fear of contagion and facing serious difficulties in maintaining supply chains as a result of disruption within the global production network. The same will be true for most of our food exports and many other items in our export basket.

Our remittances will continue to decline given the impact of the virus in the Middle East, Europe, America, and Canada. This chain reaction continues down to the level of people not being able to pay their vehicle leasing instalments or defaulting on bank loan instalment payments. For the economically marginalised, electricity and water supply will become unattainable.

Unemployment will be higher and non-performing loans will increase. Tourism will be further affected and all supply chains connected to tourism will continue along the same downward trend. Inflation will rise, given the government interventions. The Sri Lankan Government will face serious questions on how to manage our fiscal position and keep the heavy public sector afloat in this crisis. It is estimated that it will take about six to eight months to return to normalcy and we should not forget that economies have not yet fully recovered from the Global Financial Crisis.

Price control no solution

Last Tuesday (17) night, the President announced some relief measures on the economy and precautionary measures on halting the spread of the virus. The Government’s facilitation of the quarantine process is commendable for passengers entering the country from outside. However, imposing price controls on face masks, dhal, and tin fish will not help the poor. This will simply move stocks off the shelf faster.

No seller wants to sell anything at a lower price than its actual cost. The price range of Mysore dhal in the first week of March was in the range of Rs. 124-200 and the price of a tin of fish is around Rs. 220-300 for 425 g. Therefore, it is nearly impossible to sell dhal and tin fish at a controlled price of Rs. 65 and Rs. 100 respectively. The consequences would be that either the sellers will stop selling these to avoid legal repercussions, which will hit the poor and rich both as they will have nothing to buy at the shelf, completely distorting the market, or sellers will continue to sell at a higher price, defeating the Government’s purpose.

A similar situation occurred regarding the controls imposed on face masks, and these are already no longer available at pharmacies. What the Government could have done instead is reduced the import tariff on both tin fish and Mysore dhal, as they have now belatedly done on face masks, leading to price benefits passed on to the consumer and ensuring supply. Can you believe we pay an approximate tariff of 35% on all imported tin fish?

On Thursday CBSL ordered to suspend facilities provided for import of motor vehicles and non-essential goods to defend our currency. This will again impact the poor and the needy the most. In this age vehicles are not only used by the high-income earners but the micro and small entrepreneurs to run their businesses. They will get impacted badly so as will their employees. Those who use SUVs will manage.

Time for global co-operation

Constant and confusing news feeds have combined to make us feel that as countries, we should isolate. However, this is a time we all have to come together as a global community. To overcome this economic impact, we need the rest of the world to recover from this pandemic and co-operate more to avoid future challenges. We need our suppliers based in other parts of the world to recover and to be back on their game for us to kick off our operations. We need the purchasing power for our products to be better, to move faster in European and American markets. Once a vaccine for Covid-19 is finalised by scientists with greater capacity than ours, we should be able to trade and purchase it for our people. This pandemic is a good reminder that in isolation we cannot face all challenges. We are now reminded of the importance of freedom and franchising our freedom with responsibility.

In combating Covid-19, China donated medical equipment to Italy and the US. It was said that a quote by Roman poet Anneo Seneca was included amongst those supplies: “We are waves from the same sea.”

In a similar fashion, Japan donated some medical supplies to China and it was reported that the following Chinese poem was written on the wrapping: “We have different mountains and rivers, but we share the same sun, moon, and sky.”

Let this Covid-19 outbreak remind us that we all are waves from the same sea, and we all share the same sun, moon, and sky.

We hope you're safe!

A message from Advocata:

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Hi, I hope that you, your family and loved ones remain unaffected by the pandemic we have at hand. Life is a collection of seasons. The good times and the bad. Unfortunately, we don’t get to choose what we want to live through. You’ve got to go through darkness to find light at the end of the tunnel. Beyond our current reality, the economic aftermath brewing in the next few months will make things more challenging, and we need to be psychologically prepared. The question is how are we going to face this, and how are we going to overcome the impact this has had on our lives, our businesses, and our economy?  When our survival is threatened, especially in the case of a global pandemic like the coronavirus which originated miles away from home, it’s so easy to question why the world is as interconnected as it is in the first place. We’re all self-isolating, social distancing and quarantining right now and with that emerges strong sentiments of anti-globalization, anti-interconnectedness, and pro-self-sustenance.  I hope we don’t get caught up in these sentiments, even after the threat of the virus is long gone. If Covid-19 has taught us one lesson, it's that we are now interconnected more than ever. From climate change to the ongoing crisis, it's more evident by the day that what one individual or country does, will affect the rest of us. In the same way, progress in one will also mean progress in the rest.  In the months since the novel coronavirus rose from a regional crisis to a global threat, countries have been advancing their research in science to find drugs and vaccines to treat or prevent the virus. We are thankful for these efforts, from the tiny island nation of Sri Lanka because a successful trial of the vaccine, means that the rest of us too can bear the fruits of this.  Chief Seattle said it eloquently a century ago, “Humankind has not woven the web of life. We are but one thread within it. Whatever we do to the web, we do to ourselves. All things are bound together. All things connect.” Closely connected and seamless global production networks made our lives better. Most emerged out of poverty and had access to better healthcare and economic benefits. This is a time we need to support each other and work together as a global community. We need to work towards the reactivation of factories, services, and economy, together.  We all are passing a real acid test of our public and economic policy. The impact of the decisions we make now, will last generations. Only time will tell us how strong we are together and the need to work as a global unit to address challenges that are yet to come.  We are waves of the same sea and though we have different rivers and mountains, we all share the same sun, moon and the sky.  Stay safe, our thoughts are with you and your loved ones.   Dhananath Fernando Chief Operating Officer, Advocata Institute. The Advocata Institute is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka.  Connect with us!

Election in the time of pandemic: Electronic voting offers no solution

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

At a time when people are being urged to maintain social distance to prevent transmission of COVID-19 and elections have been announced, it is natural to think of electronic voting from remote locations as a solution. 

Many reasons exist for modernising the way votes are cast, including the enfranchisement of our expatriate workers and the speeding up of the counting of votes. But what is most attractive at this time is the possibility of eliminating the need for people to congregate and thereby increase the risk of disease propagation. 

Electronic voting machines versus electronic voting
Most prominently, India, which conducts the world’s largest election, has used electronic voting machines (EVMs) over multiple elections. EVMs automate a single component of the voting process. Voters would still have to come to designated locations and have their eligibility to vote and their identities established in conventional ways. 

EVMs can be designed to allow persons with disabilities to exercise their right to vote. They can reduce errors in tabulation and speed up the release of results, but they do not eliminate the need for people to congregate. They are also not a solution to the problem of allowing expatriate workers to vote.

Properly validated EVMs are all that are required for this particular solution. There is no requirement even for data connectivity. The EVM can store the votes and can transmit them when connectivity is available. The concern is about whether the EVMs have been manipulated and whether there is an audit trail in case questions are raised at a later time. 

There are solutions to the identified problems. But given the tendency of our political actors to raise questions about jilmart for no reason other than unhappiness with the outcome, it is best that EVMs be approached with caution with primacy being given to trust issues. 

Voting from remote locations
Electronic voting, also described as internet voting, is a more radical solution in that it changes many elements of the voting process. Here, the need to bring voters to specific locations during specific time periods is reduced and possibly eliminated. Within a defined time period (which can be much longer than the usual few hours), persons can cast their votes from wherever they are, including from foreign countries. 

The verification of eligibility and identity will no longer be done by the examination of identity cards, the reading aloud of names, the checking of lists by observers and so on. The voter will be in a distant location not under observation by any official. There would have to be fool-proof technological methods to verify eligibility and identity. 

There is a country that conducts elections using electronic voting: Estonia. I have met Estonian citizens who have voted in national elections while they were travelling in foreign lands. Electronic voting depends on two preconditions: the existence of advanced digital identity authentication systems and the ability to connect to the election system using the Internet. Estonia, one of the most advanced nations in terms of ICTs, satisfies both criteria. 

Over the years, the number of persons voting remotely in Estonia increased to the highest proportion: 44% in 2019. That means that even with the remote voting option available, more than half the voters chose to go a polling booth to exercise the franchise. Electronic voting will not easily displace conventional voting. It is wrong to think that electronic voting is a quick fix to the problem of conducting an election amid a global pandemic.

An incremental approach
But we do need to work on technological solutions to the problems faced by Sri Lankan citizens temporarily resident in foreign countries and by those within Sri Lanka who are living or working in locations other than where they are registered to vote. Trust is of paramount value. Therefore, it would be best to start small and gradually expand. 

The most logical starting point is voting for the workers registered with the Sri Lanka Bureau of Foreign Employment. They are legally required to be registered. 

When they register, it would be possible to issue a smart card that is capable of authenticating identity in a manner like in Estonia. 

Remote internet-based voting is the only fair and comprehensive solution for citizens living in foreign countries. Putting polling booths in Sri Lankan embassies is not a feasible solution, because the distances voters would have to travel to cast their vote would be enormous in many cases. 

For example, the embassy in Saudi Arabia is in Riyadh. It would take over eight hours of driving to get there from Jeddah, for example. And Saudi law does not mandate granting of leave to vote in foreign elections. 

Once remote voting using electronic means has been tried out successfully, the solution can be extended to those in government who now use postal voting, and then to private-sector employees who now have to take time off to vote and so on. 

If the internecine squabbling among Government entities that has so far stymied efforts to introduce identification and authentication services for citizens can be brought under control, the process can be fast-tracked so that all citizens can exercise the right to vote at times and from places of their choosing. But none of this will help with holding an election in April 2020.

Stop ragging our economy

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

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By Dhananath Fernando

The issue of ragging dominates national conversation every time an unfortunate incident of such a nature takes place, such as the recent incident at the University of Sri Jayewardenepura. After a few weeks pass, a new topic takes over and the former conversation dies down, but ragging as an activity continues in universities…and so does the vicious cycle.

The tragedy of ragging is that students have died – some by committing suicide and some as a result of violence that is often part of the rag – while many more live with emotional wounds that cannot be cured. These are only the known, reported cases. The damage caused by ragging is probably more far-reaching than what we could imagine. Many students continue to have mental health issues, maybe not even realising that the rag is the reason behind what they go through.

The reason behind ragging is easy to explain, and it is the same reason behind many social issues. “The system has been politicised.” Let’s take a look at this statement – what does it mean to politicise a system? At a surface level, “politicisation” means that a political party or an affiliated organisation of a political party is taking control over things. But at a deeper level, it is far beyond that.

Within the university system, there have been many attempts to prevent ragging. For a while, military training was provided by the Government for all students. There exists a separate office in most universities called the “Marshal Office” to identify students involved in ragging and to maintain university security. All solutions are completely disconnected from the actual problem; if the solutions provided worked, we would not be having this discussion.

Our university system is disconnected from our economy and does not follow any incentive structure to produce dynamic graduates who would be in demand. That is the fundamental reason behind many unnecessary activities occuring within our university system. One of the reasons Sri Lanka is viewed as an uncompetitive location to set up a business is the lack of graduates who suit the demands of the labour market. Our universities are stagnant institutes and the flow of knowledge, ideas, and culture is restricted on several levels.

It is true that we have produced great scholars, academics, and scientists, but we should not concern ourselves with the handful of those who reach the top – they are the outliers in this scenario. We should focus our attention on what happens to the rest. Sri Lankans tend to focus on these outliers and brush the majority of the students under the rug; a case in point would be the students who successfully pass their Advanced Level (A/L) exams, qualify to enter university, but are not admitted. For the 2016/2017 academic year, only 19% of the students who qualified to enter university were admitted. It’s time we shifted our focus to the source of the problem. (See table)

Ragging is just reaping what has been sowed. Flaws within the university system have provided space and opportunity for certain political forces to step in and exert their influence. Lecturers, political appointees, and policymakers have to be held responsible for this. While I clearly stand against those who are behind ragging and believe that whoever is responsible should be brought before the law, we also need to fix the system as a whole. Unless our university system is overhauled and restructured in a manner that equips students with the skills demanded by the economy and provides a qualification that translates into skills and knowledge that can be leveraged for gainful employment, we are unlikely to see a solution.

I was a member of the Students’ Council of the Faculty of Science at the University of Colombo when I was a student there. I represented the Faculty Board as the Student Representative for more than two years. The Faculty of Science was considered to produce the cream of the crop, with graduates going on to study at the best universities abroad – but the reality was far from this. The faculty was decades behind the rest of the world.

Once one of my friends compared his father’s lecture notes with the notes given by our current lecturer, and the notes were exactly the same. Either the university has been teaching a subject which has not evolved in the modern day or the lecturer has not been evolving with the subject. Can we expect innovation to take place and to produce graduates in competitive industries to compete at a global scale if this is the situation in our lecture halls? How can the Government justify its expenditure on tertiary education when it funds an archaic educational system that clearly causes harm to its students?

In the Faculty of Science at the University of Colombo, there was no re-correction system after the exam. If a mark was given by the lecturer, that was it – you could not question the marks. I have come across many instances where some lecturers deliberately gave lower marks as a result of personal biases against students. One time, one of my batchmates asked the lecturer just to re-check whether the addition of the marks was correct as he was so sure about the answers he had provided. The lecturer said: “I can do that, but I have to demote your result from a C+ to a D- even if the marks were added wrong.”

If the university system does not promote transparency, how can we expect these students to be transparent when they join the labour force?

Selecting students for a special degree is another rat race. After the first two years, based on the student’s performance, they will be eligible for a subject stream in which they can specialise. In the Faculty of Science at the University of Colombo, the chemistry special degree is considered the most prestigious. Since the number of special degree opportunities is limited, it was common for students to hide some books in the library and even tear out pages in certain valuable books to make sure no one else gets the opportunity to study what they studied.

The competition varies based on the opportunities available in main universities in America. I recall an incident hat took place when I was enrolled where the Students’ Council President received a complaint from a molecular biology student that a mathematics student had been eligible for a molecular biology special degree as per the results of the Department of Examination. To put the issue in context, this is similar to an arts A/L student being accepted to the Faculty of Medicine. The subject streams are completely different. The impact was serious. Since this is a limited opportunity, the student who was next in the list lost the chance to do the molecular biology special degree. When we took this to the Dean and the heads of the Department, you would have been surprised at the solution they provided. They increased the special degree intake by one student and allowed the mathematics student to continue doing the molecular biology degree. I can provide 100 similar examples on the backwardness of the Faculty of Science.

There is no mechanism to evaluate the lecturers, their content, and whether they teach what is required by the industry and the modern-day world. When a system is stagnant and not based on proper incentives, the connected stakeholders become slaves and victims of the same system itself. And ragging is a byproduct of an outdated, unevolved system.

Identifying the reasons for government inefficiency is not that hard; 77% of our university graduates are employed in the public sector. This goes up the hierarchy from grama sewa niladaris to secretaries to key ministries and even to the Central Bank. So the people in senior positions in government institutions are coming from a background and culture of inconvenience and a system which is stagnant.

Imagine a similar incident taking place in a private university. The chances are very low because it is a competitive system. This doesn’t mean our private universities are part of a flawless, perfect system, but undoubtedly there are lessons we can learn. If you look at some private educational institutes, the students evaluate the lecturers and there is an incentive for the lecturer based on the student’s voting. To an extent, constant upgrading of content is included in the system.

The solution for ragging is beyond implementing strict punishments. While the importance of enforcing the law and ensuring the culprits are brought to justice cannot be understated, there is more that has to be done. Sri Lanka is in dire need of a university system that promotes transparency and an incentive system that updates the curriculum content to that of our economy. Just slapping a plaster on this issue will worsen the situation.

The cost of being a Sri Lankan woman

Originally appeared on Daily FT, Economy Next

By Nishtha Chadha

This year’s International Women’s Day theme is #EachforEqual - a concept grounded in the idea of ‘Collective Individualism’. Collective Individualism is the idea that each of us is part of one whole. Our individual actions, conversations, behaviours and mindsets go beyond the confines of our individual lives, and can have a significant impact on our larger society. Collectively, we have the capacity to create a gender equal world. 

Gender equality in Sri Lanka

Sri Lanka still has a significant way to go when it comes to gender equality. The Global Gender Gap Report 2020 ranks Sri Lanka 102 out of 153 countries in the gender equality index. Women’s economic participation and opportunity, educational attainment and political empowerment are major areas of concern, and only seem to be getting worse.

In 2006, Sri Lanka ranked 13th on the same gender gap index. In other words, over the last 14 years, the country has dropped 89 places on the index. Today, women are twice as likely as men to be unemployed, and barely 9% of Sri Lankan firms have women in top managerial positions. Only 5% of Sri Lanka’s parliament is made up of female representatives. 

Gender equality is not just a women’s issue, but a business issue. The World Bank Vice President for South Asia Region, Hartwig Schafer, has stated that Sri Lanka specifically could grow its economy by as much as 20 percent in the long-run by closing its gender gap in the workforce. Increasing women’s labour force participation can improve productivity by not only adding more people to the workforce, but also by enhancing diversity of thought in the workplace. 

So, why aren’t Sri Lankan women achieving their full potential?
A recent publication by the World Bank ‘Getting to Work : Unlocking Women’s Potential in Sri Lanka’s Labor Force (Vol. 2)’, cites that cultural norms continue to be a pervasive barrier to increasing women’s labour force participation in Sri Lanka. Entrenched with gender stereotypes, these cultural norms have direct implications on women’s educational pursuits, career longevity, and ability to participate in decision-making roles. What’s important to understand about cultural norms, however, is that they do not exist in a vacuum. Gender stereotypes which limit a woman’s ability to access education and economic opportunities. 

One example of these discriminatory policies are the exorbitant taxes on menstrual hygiene products in Sri Lanka. Access to safe and affordable menstrual hygiene products remains somewhat of a luxury for many Sri Lankan women. A leading contributor to the unaffordability of these products in Sri Lanka, is the taxes levied on imported items. 

Sanitary napkins and tampons are taxed under the HS code 96190010 and the import tariff levied on these products is 52%. Until September 2018, the tax on sanitary napkins was 101.2%. The components of this structure were Gen Duty (30%) + VAT (15%) + PAL (7.5%) + NBT (2%) and CESS (30% or Rs.300/kg). In September 2018, following social media outrage against the exorbitant tax, the CESS component of this tax was repealed by the Minister of Finance. Yet, despite the removal of the CESS levy, sanitary napkins and tampons continue to remain unaffordable and out of reach for the vast majority of Sri Lankan women. 

The average woman has her period for around 5 days and will use 4 pads a day. Under the previous taxation scheme, this would cost her LKR 520 a month.  The estimated average monthly household income of the households in the poorest 20% in Sri Lanka is LKR 14,840. To these households, the monthly cost of menstrual hygiene products would therefore make up 3.5% of their expenses. In comparison, the percentage of expenditure of this income category on clothing is around 4.4%.

The impact of unaffordability

The high cost of menstrual hygiene products in Sri Lanka has direct implications on girls’ education, health and employment. 

According to a 2015 analysis of 720 adolescent girls and 282 female teachers in Kalutara district, 60% of parents refuse to send their girls to school during periods of menstruation. Moreover, in a survey of adolescent Sri Lankan girls, slightly more than a third claimed to miss school because of menstruation. When asked to explain why, 68% to 81% cited pain and physical discomfort and 23% to 40% cited fear of staining clothes. 

Inaccessibility of menstrual hygiene products also results in the use of makeshift, unhygienic replacements, which have direct implications on menstrual hygiene management (MHM). Poor MHM can result in serious reproductive tract infections. A study on cervical cancer risk factors in India, has found a direct link between the use of cloth during menstruation (a common substitute for sanitary napkins) and the development of cervical cancer; the second-most common type of cancer among Sri Lankan women today. 

The unaffordability of menstrual hygiene products is proven to have direct consequences on women’s participation in the labor force. A study on apparel sector workers in Bangladesh found that providing subsidized menstrual hygiene products resulted in a drop in absenteeism of female workers and an increase in overall productivity. 

Slashing taxes for gender equality

Internationally, repeals on menstrual hygiene product taxation are becoming increasingly common due to their proliferation of gender inequality and the resulting unaffordability of essential care items, commonly known as ‘period poverty’. Kenya was the first country to abolish sales tax for menstrual products in 2004 and countries including Australia, Canada, India, Ireland and Malaysia have all followed suit in recent years.

If Sri Lankans are serious about creating an equal platform for women and girls to achieve their full potential, ‘Collective Individualism’ is certainly the key. Gender equality can no longer be just a ‘women’s issue’. It’s an ‘everyone issue’. Each and every Sri Lankan has a responsibility to demand real action from their policymakers, to promote gender-sensitive policies and abolish taxes like this, which actively limit a woman’s ability to achieve her full potential. 

By reducing the rates of taxation, the cost of importing sanitary napkins and tampons will simultaneously decrease and stimulate competition in the industry, further driving prices down and encouraging innovation. The conventional argument in favour of import tariffs is the protection of the local industry. However, in Sri Lanka, sanitary napkin exports only contribute a mere Rs. 25.16 million, or 0.001%, to total exports. 

Increased market competition would also incentivise local manufacturers to innovate better quality products and ensure their prices remain competitive for consumers. Other common concerns pertaining to the issue of low quality products potentially flooding the Sri Lankan market if taxation is reduced are unlikely to materialise, since quality standards are already imposed by the Sri Lankan government on imported products under SLS 111.

If menstrual hygiene products are made more affordable it is likely that more Sri Lankan women will be able to uptake their use, allowing them to attend more school days, work more consistently and, by extension, access more opportunities. Moreover, with more products entering the market, women will have expanded consumer agency, allowing them to purchase products that address their specific needs without being economically burdened for it. This would remove a significant barrier to women's empowerment and create a wide-scale positive impact on closing Sri Lanka’s present gender gap. 

Gender equality can only be achieved when we begin dismantling the structures that disadvantage our most vulnerable counterparts. Abolishing Sri Lanka’s menstrual tax may just be one small step towards achieving this. The Advocata Institute has launched an online campaign titled ‘the costs of being a woman’, which highlights taxes that disproportionately affect women. With every discriminatory tax and policy that is abolished, the collective impact could be transformative. 

That is what #EachforEqual is about - sharing the responsibility to create a more equal world for each and every one of us. 

Are Sri Lanka’s women really free to work?

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

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By Dhananath Fernando

Around 20 years ago as I recollect, there was a discussion on Sri Lankan radio about whether it was fair for women to wear trousers or jeans. This was a topic of conversation that was raised at a time when a female president led the country; a country that had produced the first female Prime Minister in the world.

When I was at Colombo University, the topic “Should women wear trousers?” was assigned for a debate during the ragging period. Though we have seen some progress on this topic, the manner in which we, as a society, treat women has not changed drastically.

Walking in the shoes of women is a difficult concept to consider as a man. Today, we can see women voicing out multiple social and economic issues that they have faced. As men, we should be using our privilege to give women a wider platform and have them at the forefront in driving social and economic development.

Women in Sri Lanka are unfortunately often expected to carry the brunt of the care burden, regardless of whether they also engage in paid labour or not. However, what many do not realise is that this is a twofold struggle. Women not only have to balance all this work, but also endure the emotional toll that comes with it. Generally, they find themselves shouldering the logistical burden of co-ordinating and delegating any tasks that they do not take on themselves. This burden is already an unreasonable expectation. Women’s domestic labour should in fact be classified as an unpaid business. However, we are only adding to this problem via high tariffs on items such as LP gas cookers and washing machines. Most women are limited by their domestic labour, and the degree of freedom and choice that they have outside of this often depends completely on the affordability of tools that ease their burden.

The worrying fact is that our economic policy is what limits the freedom of women in many cases. At my previous office, my colleague used to celebrate her mother’s birthday for a week and her celebration was simple each year. She would bring home food for dinner for a week so that her mother would not have to cook dinner during that birthday week. I asked her: “How is not allowing your mom to cook for a week a treat?” She replied: “If you know how painful it is to run a kitchen every day you will realise what a good treat it is to take rest for a week.” I realised that she was absolutely right. Sri Lankan women are giving up their paid jobs in order to take on the domestic burden of their households.

It is no surprise that Sri Lanka’s female labour force participation declined from 41% to 36% from 2010 to 2016 when our economic policy is doing its part to keep women out of the labour force.

The fundamental question we have to ask here is whether our women have truly been given the freedom of choice, or whether this choice is hindered by our policy and social ecosystems. If women wish to choose a career outside of their home, do they actually have the ability to make that choice? This should be a basic right. The conversation on economic rights needs to go hand in hand with that of social rights. How have we set our economic parameters? Let’s take a look at our tariff policy and how it impacts the lives of Sri Lankan women.

High tariffs on household electronics

It was saddening to see the amount of household durables that most Sri Lankan women who work in the Middle East buy at airport duty-free shops. It is a clear indication of the high tax applied on daily household durables such as washing machines and cookers.

Are we not restricting women’s freedom by making these household durables unaffordable for them? According to data by the Department of Census and Statistics, only 20% of all Sri Lankan households use a washing machine. Washing machines might not be within budget for the rest of the 80% of households, but high tariffs are definitely a reason why the numbers of those using washing machines are so low. The time saved from washing clothes could have easily been used for paid external work, limiting the domestic burden that tends to fall on women. This same rationale applies to other household durables such as refrigerators and cookers.

High tariffs on sanitary and childcare products

Another category that is making life more difficult for a woman is unfair taxes on sanitary napkins and baby diapers. As childcare within a household generally falls on women, both of these goods are essential items that need to be purchased. Regarding taxation on sanitary napkins, Advocata’s strong punchline said it all: “‘I love having my period and paying tax on it,’ said no woman ever.” According to research by Advocata, a woman spends approximately Rs. 600 every month, and Sri Lanka has about 4.2 million menstruating women. While the tariffs on sanitary napkins have been reduced, they are still around 52%. It should not be hard for us to walk the talk of empowering women by bringing down the tariff rates on such simple matters. Can we be proud to say, as a country, that we have a 52% tariff rate on our menstruating women?

Surprisingly, baby diapers are also taxed at 52%. This is a double whammy on women. Caring for an infant requires spending a significant amount of time washing kids’ clothes and making them comfortable. Having diapers which are unaffordable is just another hindrance.

I do not have the luxury of space in this column to elaborate further on how we are making women’s basic needs expensive and limiting their freedom; we cannot be proud of the situation that the women in our country are in. They continue to be held to unreasonable expectations, including shouldering the domestic burden within a household. We need to work towards alleviating both the social and economic pressures that women are under. Women deserve the freedom of choice. Women have the ability to engage in paid work if they want to. We need to ensure that women also have an equal opportunity to choose paid work if they want to. So this will be yet another Women’s Day without true freedom for women.

Is Sri Lanka getting old before getting rich?

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

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By Dhananath Fernando

Life is often said to be a continuous battle between time, money, and energy. When we were kids, we had time and energy, but were limited by our lack of access to money. When we started working and earning money, time was difficult to find. As we walk the journey of life, we will come to a period where we may have time and money, but not energy.

Let’s apply the same variables to Sri Lanka as a country to see where we stand in terms of money, time, and energy. The picture is, unfortunately, shocking.

Our current gross domestic product (GDP) per capita is about $ 4,000. If our per capita GDP achieved a sustained growth of 4% (our 2018 economic growth is 3.2%), Sri Lanka would reach Malaysia’s current level of income per capita by 2038 and Singapore’s current level of income per capita by 2080. Even if we achieved a 6% real per capita growth, it will be 2031 before we reach Malaysia’s current level and it would take till 2060 to reach where Singapore is today. Even if we pull our act together right now, it will take close to a generation, about 30 years, to see the light at the end of the tunnel.

As a nation, we have an ageing population and 21% of our population will be over 60 in 2030. This percentage is said to increase to 28.6% by 2050. Compare that with the population over 60 in 2015 – it was just 13.9%.

If we keep political flags aside, our current mayhem is a result of bad policy choices that we have made and supported for the last 70 years. It is easy to point fingers at politicians and they surely must take accountability for their actions, but the deeper question is: Aren’t the politicians that we are electing and their policies a reflection of our choices?

The wealth of a country and its people is often considered over time. A person classified as “poor” by current standards still has a lifestyle better than an emperor would have had a few centuries ago. But this doesn’t mean the poor person is an emperor today. The world has moved in giant leaps and the real challenge is to be comparative with current standards. Unfortunately, us Sri Lankans live in a bubble of constant reflection of prosperity in past millennia and focus solely on recreating the glories of a bygone era. There is nothing wrong with tapping into knowledge in history and learning from it, but we need to recalibrate these lessons and understand that the context and the consequences are completely different now. Trying the same formula which worked for us millennia ago nowadays will not make us rich before we get old.

Every time a discussion on open trade and competition is started, most of our fellow Sri Lankans march to the streets demanding protectionism. The consequences are evident. Our trade openness has dropped to about 37% from 78% over the span of a few decades. We still believe having higher import tariffs will improve local production and competitiveness in the market. Hiding from competition in this way is the same as trying to win a Cricket World Cup without playing a single match with an international team.

The extent to which we have hidden from competition is at an absurd level. Would you believe me if I told you that most of our daily household products are protected by unreal custom duties and protectionist taxes which drive our cost of living through the roof? This is in a country where more than 50% of its population finds it difficult to earn even $ 3 a day.

Ravi Ratnasabapathy has highlighted the absurdity of taxes on commonly used household products in a column in the Echelon business magazine. The import taxes for cereal add up to 101%, fruit juices to 107%, noodles to 101%, aftershave to 120%, toothpaste to 107%, etc. The list is too long to continue.

The big question is what this Government could do to make our people rich before they get old. First, we have to understand that all the economic problems we face are interconnected and that there are no isolated solutions. A summary of problems is listed below:

1. Low GDP growth rate

2. Low export growth

3. Balance of Payment problems

4. Low transformation of export basket

5. Low foreign direct investment (FDI)

6. Low immigration

The Government has to take a combined approach and implement a rapid reform process if we are to have even the wildest chance to move an inch forward from where we are right now. At this point of time, the Government seems to churn its wheels through personality-driven power and dynamic individuals whose focus is on getting things done fast. In the first place, the Government needs to understand there is only so much development that can be sustained through a personality-driven approach.

For example, trying to ease traffic congestion through the use of Military Police is a short-term solution. The long-term answer to this problem is the introduction of a high-quality public transport system. But to improve public transport, certain reforms are necessary, such as the introduction of competition to railway operations, easily obtainable route permits for luxury buses, and price openness in order to develop innovative transportation options and products.

Without an understanding of long-term solutions, government intervention in bringing more buses under the Ceylon Transport Board (CTB) and shuffling the train timetable will not bring sustainable results. Instead, this will burn the Government’s energy and precious time.

The same applies for all of the above economic issues. The Government should address low-hanging fruits such as the implementation of a proper visa regime for foreigners who wish to work in Sri Lanka, and allow for foreign spouses who are married to Sri Lankans to work here. Having diversity means introducing more innovativeness into the system.

The second step to addressing these economic issues is fiscal consolidation and the cutting of existing red tape which affect business. President Rajapaksa announced his support for eliminating unnecessary regulations during his Independence Day speech, and the time has come to walk the talk. The barriers for imports and exports are still enormous, ranging from obtaining a loan to getting a license.

These regulatory and legislative barriers need to be addressed. We are then left with no other option but further fiscal consolidation. Unnecessary political recruitments have to be frozen and government expenditure needs to be tightened. Very importantly, the Government has to start somewhere and look beyond rosy elections through to bitter deliverables. Things will only get darker as the clock ticks on.

To be honest, getting rich before we get old is only a dream for our generation. The question is: Do we want our kids to get old before they get rich too?