Ceylon Today Editorial

CONSPIRACY THEORY GETTING CREDIBLE

13 November 2016

The emergence of a gang in the Northern Peninsula, so far armed only with swords and machetes, according to reports in sections of the media, instilled apparently serious security fears in Northern Chief Minister C.V. Wigneswaran. This reportedly is because among the suspected gang members arrested by a special force sent to the North on the specific orders of President Maithripala Sirisena to nip AAVA in the bud, has been a member of Wigneswaran's own Tamil People's Council(TPC).

If that is true, it means the gang's handlers have successfully infiltrated perhaps even the TNA but has certainly come as close to Wigneswaran as the bogus cameraman who approached President Sirisena at Pandit Amaradeva's funeral, having given the PSD, CID, ordinary Policemen and Army intelligence men who were at the venue the slip.

That would be as unnerving and worrisome to the President and Prime Minister as the arrest of a TPC man as a suspected AAVA group member. Almost in immediate succession came the attempt by disabled soldiers to gate crash the Presidential Secretariat. Therein hangs a mystery. Surely the BBS monks who were egging on the soldiers were fully aware – as the rest of the country was – of the fact that President Sirisena was in India at that time.

That being the case, who in the Police Department deployed a sizable number of Policemen to wade into the soldiers and why were BBS monks playing a pivotal role in that obvious affront to, and contempt of, the law pertaining to legitimate security concerns in a declared High Security area such as the Presidential Secretariat precincts.

What's comical is that the photographer who gave top security the slip to gradually wend his way close to the President and Premier could well have been armed with a gun or bomb. Was that a dry run? If that had been a real attempt on the President's and Premier's lives, it would have succeeded and plunged the nation into a national crisis demanding more than a State of Emergency. And should that have been the scenario, in the absence of the President and Premier, the situation would have not been better for a total services coup to have been pulled off. That's how seriously the so-called top Presidential and Premier's security apparatus fell down on their job.

Take the approach of the soldiers to the Presidential Secretariat. Why were they not stopped in their tracks a safe distance away from the premises? The answer blows in the wind! Another dry run? Apparently that's how the President saw it because even before he returned to Colombo from India the Secretariat released a statement to the media defining it as a conspiracy against the government. Whether the President knew about the release of that statement or whether he directed it from Delhi one does not know. But on his arrival he reiterated what the statement said about the political conspiracy against the government masquerading behind the soldiers' demonstration. The PM checked out some facts and told Parliament on Friday that should a probe turn up evidence of mala fide intent, the Policemen involved in the attack would be kicked out of service. The President has not yet deemed it necessary to convene a Security Council meeting to discuss the allegation of a conspiracy that he made and review the national security apparatus. That could mean one or more of many things. The IGP has been mum on the Premier's statement. That has fuelled more public speculation about the conspiracy theory that we know was birthed when the government withdrew Army security from the former President and former Defence Secretary, seen in many quarters as a protectionist move rather than an administrative change.

Now we have the Northern Chief Minister reportedly appealing to the visiting Baroness Anelay to persuade the Commonwealth body to move the United Nations to send a Peace Keeping Force to the North on the basis that the Lankan Government has been proved incapable of securing the peace and security of the people and Tamil leaders in the North. The UN Charter provides for such an appeal but there has been no indication of what Baroness Anelay's reception was to Wigneswaran's appeal. Obviously she will not accede to his appeal because going by her post-visit media statement it would seem that her response was noncommittal.

That however could change should AAVA trigger a security scenario that buttresses Wigneswaran's appeal and justify his fears. On the one hand we saw the week ending on a sombre note with heightened national security fears, conspiracy theories, apparently legitimate personal security fears by Wigneswaran and somehow the beginnings of a socio-political trans-current fault in the making, that could, unless the government takes immediate pre-emptive measures, rip the fabric of the tenuous peace apart, from North to South.

Weekend Nation Editorial

Hold impartial inquiry on bond scam

13 November 2016

The Joint Opposition (JO) has taken up the cudgels against Prime Minister Ranil Wickremesinghe calling for his resignation on the grounds he appointed Arjun Mahendran to the post of Central Bank Governor and continued to support him even after his alleged involvement in the infamous bond scam.

Resignation has been demanded because the Central Bank technically came under the purview of the Prime Minister and he had given relevant instructions to the bank with regard to the bond issue They point out that even after the bond scam the Prime Minister was not in favour of removing Mahendran from the post, but it was President Maithripala Sirisena who finally prevented his reappointment by nominating Indrajith Coomaraswamy to the post of Central Bank Governor.

Following the recommendations of the Parliamentary Committee On Public Enterprises (COPE) the Prime Minister, however, referred the committee’s report to the Attorney General for legal action. It is in this context that the joint opposition has threatened to organize countrywide protests demanding the Premier’s resignation.

One thing that is relevant here is that ours is not a country where politicians have ever set examples in the past by resigning from their positions whenever some major allegations were levelled against them. The other point is, if Ranil Wickremesinghe resigns at this juncture will it resolve all our problems? At least will it be the end of all corruption in the country?

On the contrary it will be the beginning of a new political crisis in the country especially at a time the new government is trying to put the economy on the right track with some clear vision for the future.

The advantages of such a resignation and the ensuing political uncertainty will go to corrupt politicians who are already being investigated and those who are already indicted and have little choice other than making every effort to topple this administration.

Meanwhile President Maithripala Sirisena has publicly stated that he came to power with the promise of good governance and therefore his responsibility is not only to punish those who have done wrong things in the past but also to prevent recurrence of such things under his own administration.

The President is still the head of the state and head of the executive and has all the powers to ensure an independent investigation into this matter and punish those who are responsible. He has made it clear that he is determined to obtain an impartial verdict through the country’s legal system.

So what is necessary is to rely on the assurances given by the President and our own legal system and to carefully watch the manner in which the investigations are conducted and not to create political chaos by having public campaigns demanding resignations or change of administration.

Sunday Observer Editorial

Budget 2017: can Business take up the challenge?

13 November 2016

When Finance Minister Ravi Karunanayaka entered Parliament last Thursday to present his second Budget, television showed him brandishing his new black ‘Budget briefcase’ as if there was little inside it. As the nation heard out his Budget speech, the usual mixed bag of higher taxes in some sectors, lower taxes in others and, slightly lower prices of some basic food items were only half the story.

Even if there will be some grumbling at popular level that more was not done to reduce living costs, what has to be appreciated is the larger framework of forward-thinking measures to not just push economic development but also boost the market economy overall. Again, a few sectors may complain of a lack of incentives and some discouraging levies. But overall, the strong business-friendly proposals are aimed at laying the foundation for rapid investment across some key sectors of the national economy.

This is that other half: a carefully crafted investment and business activity boosting framework that is looking at the medium term future economy. ‘Development’ is not simply a list of State-initiated ‘projects’ – although, in a country that is only yet halfway to fuller development, such State interventions are still relevant. Rather, on the one hand, Budget 2017 seeks to encourage greater private sector investment and market activity in selected areas that will add value to the economy.

Clearly, the Government is taking the country’s new ‘middle income’ status seriously and, unlike the previous regime, not merely flaunting this status as an ‘achievement’. After all the Per Capita GDP ratio that indicates a country’s income status is but a measure of progress towards a more affluent and comfortable society and not some goal that had to be attained once and for all. ‘Middle Income’ status must be seen as just the entry of a nation into a higher level of income that is above ‘Low Income’ developing country status in which this country has languished since it was freed of the colonial straitjacket not too long ago.

Budget 2017 is clearly a quick move to systematically exploit the new economic and social dimensions that open up with entry into Middle Income status. One important socio-economic dimension is the significant broadening of the country’s middle class.

The Budget includes many measures that will, while taxing some things that are very much a middle and upper class activity, such as telecommunications, also encourage more consumption by these social layers. This will immediately boost market activity overall, itself, a vital ladder for private sector success.

But the above middle class-targetted measures are only the tip of the iceberg. At the heart of the ‘development’ dimension of Budget 2017 is a swathe of fiscal measures and tax incentives targeting some key major sectors of the economy. Banks are given a push both in terms of incentives and also minimum performance criteria for expansion. Agriculture and agri-business has also been favoured with schemes and incentives as has been the tourism industry and such economic infrastructure sectors as telecommunications and road construction.

While the attempt to further boost the banking sector clearly aims at long term modernising of the way money is used in the country, in the short term, the Central Bank will have to keep an even sharper eye on inflationary trends that are, already, rising slightly. The intended expansion of the construction and telecommunications sectors will be vital as infrastructure for overall private sector expansion across the range of sectors from industry and agriculture to transport to trade and tourism. At the same time these two sectors will also provide more employment.

Agri-business expansion is critical in view of the gradual fading in importance of the traditional colonial export industries of coconut and rubber. While the country has already gone beyond the traditional ‘big three’ (tea, rubber and coconut) of the colonial economy, major new sectors, especially in the rural and semi-rural areas need to emerge in order to enable more economic expansion in these areas. Rural poverty is yet a long term challenge and governments have fallen due to their failure to look after these segments of the population. The measures encouraging tourism are most sensible since that is a major foreign exchange earner and employer, especially in some rural areas. Unlike some other export industries like apparel, tourism is a sector that brings high value addition to the country.

The encouragement of middle class consumption will certainly help boost retail markets further and, thereby, help expand small businesses. But micro-enterprises cannot be the only way to absorb the labour force. The labour market needs large infusions of young people ready to enter various forms of wage employment in the economy - especially in the private sector. The country needs greater regularising of the labour market itself in order that, on the one hand, business itself can more systematically deploy labour, while, on the other, greater wage labour results in greater consumption.

However, an ‘Achilles Heel’ of Budget 2017 is its lower emphasis on social infrastructure as opposed to hard economics. Both the education and health sectors, especially the State-supported ‘universal’ health and education systems that have been the bedrock of this country’s, relatively phenomenal, social development, seem to have lost out in Finance Minister Karunanayake’s proposals for 2017. Neither the State health nor education systems have received any boost. Rather, the budgeted State investment in these two sectors is even lower than that of 2016.

This is something that the Government will need to be alert because both these sectors, having contributed so greatly to the current social wellbeing, are naturally very sensitive sectors.

In the first place, the expansion of some of the other sectors, such as construction and telecommunications, as well as tourism, can only take place if there is an expanded skilled labour force available. And this can only be made available quickly via the State-supported education system which, thanks to its founding fathers, already has much of the necessary basic infrastructure for vocational training but needs modernisation and equipping. The private education sector cannot be expected to deliver this skilled labour requirement in the short or medium term. In the first place, private education is yet to be properly regulated and provided with the necessary standard-setting for its development. And when VAT now affects the private health services, the need for the State health system is even greater. It is imperative that the Government gives some indication of its thinking with regard to these two sectors and indicate that at least in the long term, there will be greater attention paid to education and health.

At the same time, another area that should have been given more attention is the need for rebuilding the war-battered Northern region. Any failure in development in the worse hit region is fraught with dangers given that this was once insurgency-ridden area and society. Further, a gap in funding from Colombo will only add to the sense of marginalisation felt by the Northern society and goes against the need to further integrate that society into the national mainstream.

Overall, it is a genuinely development-oriented Budget done creatively and, in the light of public sensitivities, bravely. It is now up to the business sector to take up the challenge and respond with vigour. After all, the war and instability cannot be excuses any more. Just as the Government is taking political risks, the business community must now live up to its vocation of ‘entrepreneurship’.

Sunday Times Editorial

Trump trumps: Will he dump liberal America?

13 November 2016

And so, the American voters have picked the unknown devil (instead of the known devil) to lead them for the next four years. In their somewhat skewed election process, the defeated candidate got more popular votes than the winner who to the much over-rated ‘most powerful job in the world’ – the President of the United States of America.

They were unable to break the ‘glass ceiling’ in electing their first woman leader, throwing her and her baggage of 30 years in public life out of the window. Not all the coconuts broken by Tamil National Alliance politicians for her victory were of any use. Maybe they should have broken more. The ‘silent majority’ in America ignored what the President-elect’s detractors said about him, and voted for change.

Misleadingly called ‘the policeman of the world’, given the United States’ pre-eminence in world affairs (and that is not necessarily a compliment), many are those who say, not always in jest, that the world’s citizens too must also have a vote in picking the man or woman for the job.

The Donald Trump victory only reinforces a growing global trend we have referred to recently (Oct. 9) that all over the world, the ruled are reacting against the rulers – even if they have been placed in power and place by these same voters. They are reluctant to trust the rulers implicitly. Britain’s ‘Brexit’ vote is a textbook case. The anti-incumbency trend that Sri Lankans experienced in January last year, terribly misread by those cocooned in office, is a worldwide phenomenon. In the US, this week, many people did not trust the Government of the day – even though the incumbent President remains popular.

The disturbing signs of the US election and what is happening in much of Europe today are that the world is becoming more and more insular. The refugee problem, started by the triggering of wars by the US and European nations in West Asia and Africa, and the unequal world economic order have given momentum to a refugee crisis last seen during World War II, 70 years ago. This has given rise to xenophobia and momentum to the Far Right in Europe, and now in the US with the influx of migrants, sending shivers through local inhabitants. Home-grown terrorism as a corollary to this migration has only compounded the fear psychosis within native populations in the US and the West.

It was the ‘white voters’ afraid of foreigners taking their jobs and indulging in terrorist acts who tipped the US election this week in Trump’s favour for that was his strident message that resonated with the voter.

There are some salient features that Sri Lankan leaders might take serious note of from the US elections. One is that these elections – and the subsequent oath-taking, are held on fixed dates and not subject to the whims and fancies of the incumbent President. Here regrettably, we have seen in recent years, all types of shenanigans from calling snap elections to secret oath ceremonies behind closed doors.

The US and the world now enter an era of uncertainty in January next year. It is a leap into the unknown, but that is not always a bad scenario because there was so much amiss not least in the management of US foreign policy.

However much President Barack Obama resisted going to war (he always maintained that war was not the only option to settle disputes), he could not take on the Generals in the Pentagon backed by the multibillion-dollar arms industry, the CIA and those who run Washington. That is why his job is not necessarily the most powerful in the world. He is restricted and constrained by ‘The Establishment’. If President-elect Trump thinks he can change Washington and ‘The Establishment’, good luck to him. Unless he fits into the mainstream of US ‘politricks’, he will face the consequences from within ‘The Establishment’.

Many Sri Lankans are not all that unhappy with the outcome of the US election considering the stories that the pro-Eelam Diaspora lobby had made heavy donations to the Clinton Foundation and exercised some influence over the one-time Secretary of State. The ruling UNP, has an alliance with the winning Republican Party through the IDU (International Democratic Union) of which it is a partner, and its representatives attended the Republican Convention (not the Democratic Convention) this year. On the other hand, Mr. Trump is a renegade Republican and his anti-Free Trade Agreement thinking as well as threatening big US companies investing abroad with huge penalties does not bode well for Sri Lanka looking for foreign investors and trade pacts with the US. The Foreign Minister made deep friendships with the Democratic Party-fuelled State Department and through them the Tamil Diaspora, but he will now have to start all over again with the new dispensation.

One redeeming factor would be that a Trump Administration would be least interested in the UNHRC Resolution against Sri Lanka, or one hopes so, particularly when the UNHRC chief undiplomatically weighed in against a Trump Presidency. It is now up to Sri Lanka to take advantage of this change of guard in Washington come 2017.

Sri Lanka has rarely been on the radar of the White House, and much of US policy towards Sri Lanka is dictated by the State Department and to some extent, Congress. A State Department under Mr. Trump may not be best placed to push its human rights agenda around the world calling for minority rights with its President being accused of being a white supremacist.

For many years, the US distinguished its citizens from foreigners as “Americans” and “Aliens” respectively. The latter definition was the old, outdated language now changed in many countries to “non-residents”. Though relatively sober in his victory speech, if one is to go by his election rhetoric, the newly elected President of the United States of America – and those who voted for him — might want to bring that old definition of “Aliens” back to their lexicon. God bless America.

Climate talks at crossroads

The US President-elect Donald Trump has gone on record calling the current debate on Climate Change a hoax. This week, in the Moroccan city of Marrakesh, ministers and environmentalist are gathered to follow up on the historic Paris summit of a year ago that decided to hold the increase in global average temperature.

But come January, and if the Trump Administration thinks all this global warming talk is a hoax, and the world’s biggest polluter and contributor to the warming of Planet Earth is not an active participant to a world strategy to tackle the biggest common problem faced by humankind, then all this discussions on Climate Change is just hot air, after all.

Sunday Island Editorial

More on the budget

13 November 2016

 

The first straw in the budget wind is already aloft. Mr. Gemunu Wijeratne, president of the Lanka Private Bus Operators’ Association has threatened a general strike of his membership if the proposal to enhance the minimum fine for traffic offences to Rs. 2,500 is not amended and/or removed. He is certainly not going to mobilize public opinion around his cause. Bus drivers, and mainly those driving private buses, are not top of the pops among road users. Competition among themselves to pick up passengers at the next bus halt results in their breaking all manner of road rules. Speeding is not their only offence. They pick up and drop passengers outside designated halts. Which motorists have not endured the bullying hectoring of their extra loud horns as they thunder down the roads?

To be fair to Wijeratne and his drivers, they do already face more than a fair degree of harassment from traffic cops looking for a quick buck. The conditions of our roads and the congestion thereon are not happy prospects for those condemned to drive huge, unwieldy vehicles sometimes for 10 and 12 hours and more a day to earn a living. Motorists and pedestrians are likely to ask themselves why a threat of a strike should intimidate a government to backpedal on a proposal that would impose more discipline not only on bus drivers but also the many others with scant regard for road rules. Enhancing minimum fines for traffic offences will hopefully be a deterrent to the anarchy on our roads which is all too visible. Offenders don’t only break road rules; they also corrupt the police by offering bribes to let them off the hook after being detected. There are also those with influence who call police higher-ups and get their driving licenses back after being fairly copped by the constabulary.

Gemunu Wijeratne is not the only arm twister. Pressure is mounting on the budget proposal to offer student loans to fund university education. A powerful lobby of academics does not want those admitted to private universities to be entitled to the interest free loans of up to a maximum Rs. 800,000 that the finance minister wants to extend to 15,000 students to follow courses in selected subjects. Such selections will be based on Z scores and the courses to be followed must cater to market demand in UGC approved non-State degree awarding institutions. Predictably, the opposition is alleging that the proposal is a part of a plan to undermine the state education system. Given the potential of the proposal to gather opposition from state university students hostile to fee paying private higher education, Karunanayake is likely to be pushed to abandon his plan of allocating Rs. 300 million next year for these interest free loans. Although students in state universities do not pay tuition and get Mahapola funding support, they too would value such interest free loans to help meet living costs. Extending the scheme to the state universities too may be a possible compromise to blunt opposition. But such assistance to only those following selected courses in state universities assured of employment after their studies (and therefore the ability to repay the loans) would create other problems.

The decision to remove the tax exemption on interest earned on listed corporate debt securities is sensible. The tax exemption made these debentures high demand instruments particularly for corporate entities that would otherwise have paid a tax of 27% on their interest earnings. Most investors hold them till maturity and they are seldom if ever traded on the market. Nearly every one of such listed debenture offer is closed over-subscribed on opening day. Given that they are so easily marketable, more and more such listings have been coming up as their tax free status far outstrips the slight element of attendant risk. Although listed debentures have been snapped-up avidly, the numbers investing in them are few. Banks, corporates (mostly unlisted), insurance companies and most likely, the EPF, were among those who subscribed. Those who invested in the early issues three or four years ago have done very nicely. With the tax benefit withdrawn, later investors, including those who took up offers that came up a few days before the budget will not be doing as well. A source of easy fund raising for banks and companies will now shrink; and so also the taxes that the government can collect from them in the future.

We report on our business pages today that the Regional Plantation Companies (RPCs) are unsure yet of what the minister meant when he indicated that no stand alone RPC will be permitted to hold more than 5,000 acres of land. None of the 20 RPCs have been consulted on the proposal. As it is, they hold an average 10,000 acres each. Does the government want more plantation management companies to be floated to look after these estates which have 30 more years of their leases to run? There is no doubt that these companies, especially with poor commodity prices and unsustainable wages heaped on their backs, are in bad shape at present. While small investors in many of them have got few or no dividends, the controlling shareholders – inevitably corporate fat cats – have done very nicely by ripping off tidy "management fees," often a percentage of turnover. The government, through single ‘golden shares’ in each RPC, has wide powers which it has by and large not exercised. One example of this is the management fees drawn by the controlling shareholders, who admittedly paid more for their stakes in the companies than other investors, have collected.

As the debate goes on, more clarity on these matters will no doubt emerge. One bit of delicious irony in the budget speech was the finance minister’s announcement that the Ceylon Tobacco Company will be requested to gift the Presidential Secretariat Rs. 500 million to be spent on an anti-smoking campaign! The man who fell off the tree is being gored by the proverbial bull! Karunanayake did not say whether there is a right of refusal; nor has the company said it will grin and bear this newest travail. We will know presently. Such a ‘request’ must surely be a first in budgeting history.