Ceylon Today Editorial

FTAs: Good, bad and ugly

 23 August 2016

This newspaper, in an article titled 'FDI lowest in 10 years' which appeared in its columns on Saturday, quoting an economist said that free trade zones (FTZs) and not free trade agreements (FTAs) were the road to boost exports.

Professor Prema-Chandra Athukorala, Professor of Economics, Australian National University, speaking at a function in Colombo on Thursday organized by Advocata Institute, a local think tank, said global studies had shown that vis-à-vis enhancing exports, only 10% of the concessions offered by FTAs have been utilized in this regard.

With Sri Lanka planning to broaden its current FTA with India to an Economic and Technology Cooperation Agreement (ETCA), due to space constraints, this editorial will only focus on FTAs.

Meanwhile, as per Athukorala's lecture, the balance 90% offered as concessions under FTAs has proved to be only theoretical, with no practical value to enhance exports. He said that the stumbling block was the rules of origin (ROO) under FTAs.

In Sri Lanka's case, the island currently has two FTAs, one with India as aforesaid and the other with Pakistan. Both these agreements are over a decade old.

Athukorala, citing an example of the ROO and its impediment to boost exports vis-à-vis the Sri Lanka context said that he spoke to a joss sticks manufacturer at Mawanella the other day. This manufacturer said that he cannot export joss sticks to India by trying to avail himself of the concessions to which exporters are reportedly entitled to under the Indo-Lanka Free Trade Agreement (ILFTA) because of India's stringent ROO. As a key component in the manufacture of joss sticks is imported from India it disqualifies this manufacturer from exporting to India under the ILFTA duty concessionary umbrella because of this ROO law.

Nonetheless, Central Bank of Sri Lanka (CBSL) in its 2015 Annual Report said that Sri Lanka's exports to India, under the ILFTA was estimated to improve to the level of US$ 406 million in 2015 compared to $ 354 million in 2014, a 14.7% year on year (YoY) increase. Exports under the ILFTA comprised 63% of Sri Lanka's total exports to India in 2015, CBSL further said.

Sri Lanka's total export basket last year amounted to $10.5 billion, a 5.6% YoY decline, said the Central Bank of Sri Lanka (CBSL). As per latest CBSL statistics, the downward trend in Sri Lanka's merchandise exports, this year too was continuing, with exports in the first five months of the year declining by 5% YoY to $ 4.2 billion.

India, as per CBSL's 2015 Annual Report, was Sri Lanka's single biggest import market and also its third largest export market as at, last year, taking a total of 6.1% of the island's overall exports. The top two markets in descending order were USA and the UK, mainly led by garment exports, Sri Lanka's number two foreign exchange earner after remittances, with numbers three and four being the country's fast growing tourism services industry and tea, respectively.

While India's exports to Sri Lanka are led by vehicles, a non-FTA commodity, meaning that the country's normal import taxes apply, those of Sri Lanka's to its closest neighbouring country were led by spices (pepper), transport equipment (tyres) and animal fodder, said CBSL.

CBSL said that India was the second largest buyer of transport equipment exported from Sri Lanka in 2015, with the largest being China, raising its position to being the sixth largest export destination from the thirteenth position in the previous year, owing to the significant growth recorded in transport equipment, garments and tea exports, said CBSL.

Sri Lanka is also to sign an FTA with China, its policymakers in the current and immediately preceding regimes have had said.

Meanwhile the island's number four and five export destinations as per CBSL's statistics appear to be Germany and Belgium which bought 4% and 3% respectively of Sri Lanka's total exports last year, probably once more led by garments, while its top two markets USA and UK accounted for 27% and 10% respectively of the island's total merchandise exports.

Exports to the USA, EU and the UK, do not enjoy any specific trade concessions, such as those related to FTAs as an example.

With reference to trade with Pakistan, the other country with which the island has an FTA, CBSL said: "Under the Pakistan-Sri Lanka Free Trade Agreement, Sri Lanka exported goods estimated to worth $ 59 million last year, which was about 81% of Sri Lanka's total exports to Pakistan. $ 59 million is equivalent to 0.56% of the island's total exports last year, a mere fraction.

Nonetheless, despite the seeming 'drawbacks' of FTAs as a whole vis-à-vis Athukorala's lecture and notwithstanding the Mawanella joss sticks manufacturer's unpleasant experience in attempted exports to India which, ipso facto suffered a blow due to India's ROO requirements, FTA aided exports comprise 81% of Sri Lanka's total exports to Pakistan, though, infinitesimal in the overall export picture and 63% of total exports to India, statistics showed.

Therefore, it may be construed that FTAs as a whole, though there are only two, are working well for Sri Lanka.

Daily Mirror Editorial

President gets tough for a clean Sri Lanka 

23 August 2016

 

In what could turn out to be a landmark speech made in Matara last Friday, President Maithripala Sirisena publicly pledged he would not cover up or tolerate any act of bribery, corruption, nepotism or other vices by Ministers, MPs or other top officials of the National Unity Government. This would be in line with the new government’s vision of restoring a clean, selfless, sacrificial and people-serving politics in Sri Lanka.

He made the pledge at the first joint meeting held by the United National Party (UNP) and the Sri Lanka Freedom Party (SLFP) to mark the first anniversary of their decision to form a National Unity or Consensus Government for the first time in Sri Lanka since independence in 1948. The President’s speech was broadcast live to millions of people, while the State television and radio gave repeat broadcasts over the weekend. It was widely regarded as President Sirisena’s most powerful and toughest speech since he was elected to office in the people’s Silent Revolution on January 08 last year.

The President was speaking two days after he fired more than 40 of the SLFP’s district and electoral organisers, who are still loyal to former President Mahinda Rajapaksa. He warned that if the dissidents formed a new party, he would fully expose all the bribery, corruption, nepotism and wasteful expenditure of the former regime, where VIP politicians and officials allegedly plundered billions of rupees, which belonged to the people.

The President in the hard-hitting speech which analysts believe could mark another turning point in the country’s history said the former regime’s so-called patriots had sent the country reeling to bankruptcy with the total public debt being a staggering Rs. 9000 billion. Besides having to pay this huge debt with interest, the National Government also had the major diplomatic task of restoring Sri Lanka’s relationship with the international community, that task had been successfully accomplished. If not Sri Lanka might have faced economic sanctions with food riots and other disastrous consequences.Lashing back angrily  at those who personally attacked him, especially during the recent Kandy-Colombo march, the President said Mr. Rajapaksa had called for an early election in January last year because he knew he would not be able to win an election later in a bankrupt and isolated country crippled by international economic and political sanctions. 

Mr. Sirisena said he was horrified that those responsible for such plunders and plunder were now accusing him of putting national security at risk.With Prime Minister Ranil Wickremesinghe seated next to him, the President  said the National Unity Government headed by them had come together to save the country from its worst ever political and economic crises.

The National Government was successfully doing this though it might take another year or two for the practical benefits of this to flow down to millions of people. This would be mainly through the provision of well-paid jobs, mainly in the new technology areas, the revival of agriculture, industrial and service sectors with the extensive use of digital technology.

Bluntly rejecting the Rajapaksa group’s claim that it would be able to topple the National Government soon, the President said no one would be able to topple the Government till 2020. He said that he believed that at the next election also the people would give a mandate to continue the policy of sustainable, eco-friendly and all inclusive economic growth, along with practical steps towards reconciliation and the rebuilding of a truly multi-racial and multi-religious country through unity in diversity.

While sharing the National Government’s vision and goals, we also hope the President will put his pledges into action and deal with anyone found to be involved in bribery, corruption, fraud or the waste of public money.Over the weekend, the Voice Against Corruption movement said it would be going to the Financial Crimes Investigation Division (FCID) to file bribery or corruption allegations against five high-ranking members of the present Government. 

While expediting legal action against the former regime’s alleged plunderers, we hope the President would take tough action against Ministers, MPs, other politicians and officials against whom substantial evidence is found.  The President also reiterated he was the Chief Servant Leader of the people.We hope he insists that Ministers, MPs and public officials also should change their attitude and become sincere servants of the people, while giving what they have to the country instead of trying to grab from it.

Daily News Editorial

A disaster averted

 23 August 2016

 

The general advice given to all drivers is that if you are under the influence of liquor, don’t take the wheel. Yet, Driving Under the Influence (DUI) is one of the most common traffic offences worldwide including Sri Lanka. If that is the advice given to drivers, imagine flying a passenger plane fully loaded with passengers for 10-11 hours in an inebriated state. That is simply unthinkable and expressly forbidden by the International Civil Aviation Organisation (ICAO) and all airport authorities. Pilots are generally taught that there should at least be a period of 48 hours from “the bottle to the throttle”.

From time to time, we hear of pilots who try to break this rule or even the much more generous eight-hour rule adopted by certain aviation authorities. In the latest such incident, a SriLankan Airlines pilot was found to have consumed liquor prior to his Airbus A330 flight from Frankfurt to Colombo on August 19. He failed a breathalyzer test at the airport and the flight had to delayed by 15 hours until a replacement chief pilot could be sent from Sri Lanka. Each of the 259 passengers had to be paid compensation of up to 600 euros according to European Union regulations, on top of expenses borne by the airline for food and accommodation.

That is not all. An airline can earn money only when a plane is in the air. A delay of 15 hours for any given aircraft in a fleet affects the entire schedule, including the immediate next flight of the plane in question. Apart from the 259 passengers of this particular flight, hundreds of other passengers in Colombo and elsewhere waiting for connecting flights were affected by the delay. It also gives a very bad name to the airline, as this incident has gained wide publicity around the world, especially in Europe which is one of our biggest tourism markets.

However, there are a few positives that we can glean from this incident. We are told that the rest of the crew including the co-pilots had alerted the Frankfurt airport authorities on the somewhat abnormal behaviour of their Chief Pilot. Their concern for the safety of the passengers and crew must be appreciated. Their action possibly averted a major disaster. This indicates a strong ‘safety culture’ in the airline, now a part of the Oneworld Alliance. The airline also deserves plaudits for suspending the services of the captain in question. While SriLankan is not the only airline which faced this problem in recent times – just last month, two pilots working for Canada’s Air Transat turned up drunk to fly an Airbus A310 from Glasgow to Toronto – all airlines must carry out frequent psychological assessments of their flight crew to nip any behavioural problems in the bud.

This incident could not have come at a worse time for the airline, which is facing a financial nosedive. The rot set in during the previous regime, which appointed a totally unqualified person to helm the airline and whose top figures used the airline more or less as their own personal taxi service. The former President made SriLankan sever ties with its former strategic partner Emirates in 2008 over a personal dispute with its then expatriate CEO. SriLankan had a profitable run under Emirates management, but shorn of that link, the airline has recorded huge losses which total up to US$ 1 billion in just seven years. The new Government now faces the unenviable task of turning the airline from “Red to Black” through a variety of strategies including a wet-lease of several aircraft to Pakistan International Airlines (PIA), cancellation of several Airbus A350 planes ordered by the previous Government (this deal should be investigated separately), termination of several routes which are no longer viable and most important of all, looking for a strategic airline partner. Several top foreign airlines are reported to be interested in forming a partnership with SriLankan to take it through this turbulent period. As if SriLankan’s problems were not enough, the Government is also saddled with the problem of Mihin Lanka, the budget airline established by the former president which is slated to be merged with SriLankan. It does have several high-yielding routes which will be absorbed to the SriLankan network.

The Government has now extended the deadline for Expressions of Interest (EOI) for the reorientation of SriLankan Airlines until August 31 to give more time to interested partners to come forward. Despite the troubles it is facing, SriLankan does have several plus points with Sri Lanka attracting record numbers of tourists. SriLankan is the number one foreign carrier into India and Maldives, it has a fairly young fleet and a strong route network complemented by codeshare agreements with oneworld and other partners, it is well known for good in-flight service and above all, the new management is keen to turn things around. The authorities must tread carefully in selecting a new partner who can take these strengths forward and make SriLankan conquer new heights.

The Island Editorial

Foremost place for Buddhism

August 22, 2016

The government continues to draw heavy flak from its critics for an alleged attempt to do away with the constitutional provision (Article 9) which gives the foremost place to Buddhism when it formulates a new Constitution. Ruling politicians insist that there is no such move and their detractors are on a sinister campaign to propagate a diabolical lie for political reasons. Cabinet Spokesman and Minister Gayantha Karunathilake told the media on Sunday that Buddhism would continue to be given the foremost place in spite of claims being made by the critics of the government.

One may not know who is telling the truth. Politicians seldom do what they say or say what they do. Those who represent the government and the Opposition are adept at lying through their teeth, so to speak, if their election pledges are any indication. The real issue, in our book, is whether the political leaders who tell us they are even ready to lay down their lives to protect Buddhism really follow the teachings of the Enlightened One in running the affairs of the state.

Most of the practices successive governments have engaged in to raise their revenue, while claiming to uphold Buddhism, run counter to the core tenets of the teachings of the Compassionate One. The Buddha, according to the Anguttara Nikaya, has urged his disciples not to engage in five types of livelihood, which cause harm to others—trade in humans as well as other living beings, meat, intoxicants, arms and poison.

Leaders of successive governments have unconscionably promoted the migration of Sri Lankan women to West Asia, where they slave away as housemaids and undergo untold suffering including torture and sexual exploitation and some of them even return in coffins. This despicable practice, in the final analysis, amounts to slavery, upon which governments are dependent to earn forex to keep the economy afloat.

There have been ministries for fisheries and livestock development under successive governments to promote the killing of animals. Ironically, the leaders of the incumbent government happened to boast on this year’s Poson Poya Day, when the arrival of Arahant Mahinda, who brought Buddhism here, is celebrated, that the EU had granted it permission to resume fish exports to Europe and the fish production would increase.

The state had been involved in manufacturing liquor until some politicians lined up their pockets by selling the Distilleries Corporation to one of their cronies for a song in the 1990s. Governments have however been dependent on taxes on alcohol and tobacco. The Finance Ministry has recently boasted that the Excise Department’s revenue has increased from Rs. 57,276 million during the first seven months in 2015 to Rs. 69,326 mn during the corresponding period this year. That this ‘feat’ has been achieved at the expense of people’s health has not been mentioned. So much for the government’s commitment to upholding Buddhism!

The SLFP-led People’s Alliance, in the 1990s, in its wisdom, toyed with the idea of setting up an arms manufacturing facility in Galle. A Cabinet sub-committee was appointed to carry out a feasibility study, but later the plan was dropped. Perhaps, the then ruling politicians thought they would benefit more from commissions on arms imports than manufacturing lethal weapons here. Arms procurement became a lucrative business for many politicians and their cronies, who built business empires thanks to huge profits they made during the war.

Action has been taken to control the sale of some agrochemicals (read poisons) believed to cause serious illnesses including the Chronic Kidney Disease. But, the fact remains that the state boosts its revenue with the help of taxes on the poison trade.

Let it be stressed, lest it should be misunderstood, that the purpose of this comment is not to call for banning anything. We are only trying to expose the hypocrisy of the rulers who pretend to be great upasakas and upasikas and claim to uphold Buddhism while their governments engage in and/or benefit from trades that are antithetical to Buddhism.