Colombo (LNW): Trade unions responding to the National Water Supply and Drainage Board (NWSDB) have agreed to launch a strike action today (23) based on several concerns including the the PAYE tax and the slashing of incentives.
Accordingly, all employees attached to the outstations of the NWSDB will be launching a strike action from 9 am to 5 pm today, said Convener of the NWSDB Joint Trade Union Alliance Eng. Upali Ratnayake.
Meanwhile, a demonstration will also be held in front of the Water Supply Ministry today at 12 pm noon, he added.
As a result, all customer services of the NWSDB will cease from functioning today and the cashiers will also be closed.
Colombo (LNW): The Election Commission today (23) is set to hold a special discussion in making a final decision on whether the Local Government Election will be held on April 25, 2023.
Accordingly, the secretaries of all political parties will be called in for the meeting today, and their opinions on the non-issuance of funds for the LG Polls and the ballot papers not being printed will be collected.
Based on the observations, a final decision on whether the LG Polls should be held on April 25, 2023 as declared, or should it be postponed, and for how long will be made thereafter.
The new scheme Developing Countries Trading Scheme of UK (DCTS) has been designed to grow free and fair trade with 65 countries, including Sri Lanka.
The official delegation from the Department for International Trade in the UK visited the Sri Lanka Export Development Board (EDB) on 16 March to discuss the opportunities for Sri Lanka’s export sector under Developing Countries Trading Scheme (DCTS) to be launched by the Government of UK.
Trade Preferences Policy Manager for Sri Lanka Sofie Kinsey, Overseas Trade Policy Advisor for South Asia Fabian Hartwell, and British High Commission in Colombo Deputy Head of Trade and Investment Asanthi Fernando participated in the discussions at the EDB with the objective of identifying potential export sectors for Sri Lanka to expand in the UK market utilizing the UK DCTS.
Currently more than 6,000 product lines from Sri Lanka can enjoy zero duty access for the UK market under Enhanced Frame Work preference scheme and another 156 product lines also will be added to the same list under UK DCTS. Being a beneficiary country under UK DCTS, Sri Lanka will become more competitive to further expand in the UK market.
EDB Chairman and Chief Executive Suresh de Mel emphasized the importance of UK DCTS since the UK is the second largest export destination for Sri Lanka with a total export value of $ 966.04 million and a total trade value of $ 1,170 million in 2022. Sri Lanka’s main export products to the UK in 2022 were apparel, engineering products, coconut-based products and rubber-based products.
It was identified that some sectors from Sri Lanka like tea, rubber gloves, animal feed, ship building/boat building, gherkins, kithul treacle and rice flour have a potential to expand in the UK market under new DCTS.
The EDB requested assistance from the UK Government to promote the potential product sectors in the UK market with the purpose of enhancing the utilization of UK DCTS.
The British team assured their cooperation for Sri Lanka to strengthen the presence of value added products in the UK market by enhancing the utilization of the new preferential arrangement.
The UK Government held a series of events in Colombo for their new trade preferences scheme – the Developing Country Trading Scheme (DCTS), which will launch this year.
British High Commissioner Sarah Hulton OBE said: The UK’s new Developing Countries Trading Scheme provides Sri Lankan and UK businesses with a fresh opportunity to diversify and deepen supply chains and reduce the cost of exporting to the UK.
UK officials showcased high potential value chains and products that can benefit from the new scheme. This was based on research into UK retailers’ and consumers’ buying considerations, as well as insights from Sri Lankan producers, trade programs and policymakers.
While Sri Lanka exports numerous high value products to the UK including textiles, tea and rubber, there has been a steady decline in trade volumes between Sri Lanka and the UK since 2018.
Under UK trade preferences, Sri Lankan exports will benefit from generous tariff cuts and new products will be brought into scope, facilitating access to the UK market for Sri Lankan businesses across a wide range of industries.
South Korea has agreed to provide assistance to enhance vocational training opportunities in Sri Lanka.
The South Korean Government will also support Sri Lanka to promote employment generation and investment opportunities.
There is ample scope for investment opportunities in Sri Lanka due to its strategic location in the region officials said adding that the government has requested the Korean Embassy to encourage leading Korean companies to explore investment opportunities in the island.
Nearly 22,000 Sri Lankans are employed in South Korea and they are happily contributing to the workforce, and steps would be taken to fulfill the request made to increase the quota provided for the employment of Sri Lankans in South Korea.
Cabinet of ministers clears to ink MoU with Korean Human Resource Development Service to improve vocational training in a two-year program
Korea has come forward to assist Sri Lanka to boost vocational training and education in a two-year program.
The Cabinet of Ministers at its meeting on Monday approved entering into a Memorandum of Understanding (MoU) with the Korean Human Resource Development Service and Vocational Training Authority to boost vocational training and education in Sri Lanka.
The move follows the Attorney General’s clearance and the approval of the External Affairs Ministry and the Department of Foreign Resources received.
The Human Resources Development Service implemented under the Department of Labour and Employment in Korea has agreed to provide a grant of 2.15 billion South Korean Won to upgrade and boost the capacity of the National Vocational Training Institute in Niyagama.
This institute is operating under the Vocational Training Authority (VTA),” a statement comprising Weekly Cabinet Decisions issued by the Government Information Department noted.
The proposed project is scheduled to be implemented in a two-year program from 2023. The proposal to this effect submitted by the Education Minister Susil Premajayantha was approved by the Cabinet of Ministers at its meeting on Monday.
The Korean Government has provided assistance for ongoing projects with more than US$ 30 million to uplift the education sector of Sri Lanka.
Korean Ambassador Santhush highlighted that the Korea International Cooperation Agency (KOICA) is funding several ongoing projects that are carried out in the education sector.
Among these development projects, establishment of a teacher training system for technology stream, enhancing early academic performance and modernization of construction technology training programs aimed to strengthen the educational facilities not only for students but also teachers, parents and other stakeholders as well.
The Korean Government will continue to foster the educational talents of Sri Lankan youth by assisting development projects to improve educational participation and vocational training in Sri Lanka.
So far, Korea has channeled more than US$ 30 million to Sri Lanka to ensure inclusive development through quality education and improve the education system of Sri Lanka.
Among other avenues of Official Development Assistance (ODA), the Korean Government is paying attention to improving the quality of education, expanding inclusiveness, and intensifying vocational training in Sri Lanka.
The Korea International Cooperation Agency (KOICA) has consistently funded and supported the Ministry of Education to promote rural education.
Last year, KOICA together with UNICEF provided a grant of US$600,000 to assist the critical response to Covid-19 in the education sector of Sri Lanka.
In addition, the Korean Government continues to extend assistance to the Korean Institute of Technical Training (K Tec) in Orugodawatta, Colombo which was established with support of the Korean Economic Development Cooperation Fund (EDCF) by Korea Exim bank.
The Colombo Port City Economic Commission (CPCEC) has achieved much progress thus far of Sri Lanka’s most ambitious venture including licences issued for seven banks to set up shop and technical certificates of completion of 64 of the 74 plots.
CPCEC is the Single Window Investment Facilitator authorized to assist investors, businesses, and residents in conducting their activities seamlessly and efficiently in Port City Colombo.
Issuing its semi-annual progress report for FY 2022 from July to December 2022, CPCEC said agreements have been signed between the Commission and the Registrar General of Companies and Controller General of Immigration and Emigration in order to streamline services offered to Authorized Persons.
It also said technical Certificates of completion for 64 out of the 74 plots of the Port City Colombo SEZ have been received by the Commission. Preliminary designs for the Marina Development and Villa Project have been submitted by two investors, with several more plots in the final stages of discussion for lease.
In terms of sector progress, CPCEC said the Minister of Finance issued licences under the Colombo Port City Economic Commission Act to four banks during the first half of 2022. The Commission has since received requests from three more banks during 2022.
Additionally, 10 Financial and Banking Regulations were also drafted under Sections 44 and Sections 45 of the Colombo Port City Economic Commission Act No. 11 of 2021 and are awaiting review with the Monetary Board of Sri Lanka.
The Sri Lanka Police opened a Post on-site for visitor protection, with water access control and lifeguard services being handed to the Sri Lanka Navy. CCTV networks were also installed in public areas.
In addition to an internationally-reputed hospital and school, the Commission has identified the need for a world-class university within Port City Colombo and modified the Master Plan accordingly.
With the retail mall infrastructure complete, the CPCEC said commencement of the interior work has begun. The mall will showcase premium merchandise, with an array of cuisine options and entertainment, and is set to commence operations by Q2 of 2023.
In the wake of Sri Lanka President Ranil Wickremesinghe’s attempts to restart Japan-funded projects including the light rail transit project cancelled by the previous administration, the kingdom of the rising sun is again keen to explore investment opportunities in the pearl of the Indian ocean.
A group of Japanese investors now in Sri Lanka conveyed interest in investing in diverse sectors such as medical equipment manufacturing, pharmaceutical, travel and tourism industry especially cultural tourism, the hotel industry, property development and real estate
They expressed these views when they held a discussion with Investment Promotion State Minister Dilum Amunugama and Board of Investment top officials in Colombo recently.
Colombo light rail transit (LRT) project is the first of its kind to be developed in Colombo, the capital city of Sri Lanka. Construction of the first phase of the project is estimated to cost US$2.2 billion,
Chinese firm Seoyoung Engineering undertook the feasibility study for the project estimated to cost $6 billon and was approved by the government in October 2018, scheduled to start in 2020 and commercial operations were expected to start in 2025.
Officially launched in July 2019, the project will be implemented by the Government of Sri Lanka’s Ministry of Megapolis and Western Development (MMWD) under a public-private partnership.
Construction of the first phase of the project is estimated to cost $2.2 bn and is scheduled to start in 2020. Commercial operations are expected to start in 2025.
The investors had a productive discussion with Investment Promotion State Minister Dilum Amunugama, BOI Director General Renuka M Weerakone and other officials on key investment opportunities in Sri Lanka.
Speaking at the meeting, the State Minister opined “Sri Lanka has come a long way in making reforms and progress since the economic crisis.
The approved IMF program will definitely help enhance investor confidence, creating a conducive ecosystem to do business, thereby attracting much-needed FDIs to the country,”
Also, the State Minister explained to the delegates about the special investment policy, which is in progress to ease doing business where the BOI would be empowered to further facilitate investors. Further, discussions are underway to grant tax benefits to investors in future.
Moreover, he invited the investors to invest in five new industrial and privately managed zones to be established in the Northern Province, the Trincomalee district and other selected areas.
Meanwhile, DG Renuka M Weerakone answering the queries of delegates, stated “Investor Facilitation Center (IFC) will be a single window to conduct businesses where each investor will get an individual official to look into matters until the investor commences operation in the country,”
“Sri Lanka is making great progress as a country and has strong economic sectors and companies that are strongly looking forward to establishing investment partnerships with countries like Japan.
In this context, the BOI is looking forward to increasing and developing cooperation with Japan through novel investment projects,” she added.
President Ranil Wickremasinghe says the IMF EFF will restore Sri Lanka’s international recognition, ensure the country is not bankrupt & help banks to regain international recognition: also says it will create opportunities for low interest credit, restore foreign investor confidence & lay the foundation for a strong new economy.
President Ranil Wickremesinghe tables the IMF agreement in Parliament: urges Opposition to unite and disregard political differences to assist in carrying out the IMF agreement, which will aid in the development of Sri Lanka’s economy.
President Ranil Wickremasinghe says the Govt has agreed with IMF to reduce the primary deficit to 2.3% of GDP by 2025 & increase revenue to 14% of GDP by 2026: standard corporate income tax rate to be raised to 30% & sectoral tax holidays to be eliminated: PAYE tax rate to be raised from 12% to 15% & the tax exemption limit to be reduced from Rs 300 mn to Rs 80 mn.
SJB MP & Economic Guru Dr Harsha Silva says he is happy about the IMF EFF: asserts he is not hypocritical to not appreciate it: Silva had previously strongly supported the sovereign debt default as well.
SJB MP and Financial expert Eran Wickremaratne says some are of the opinion that all problems will vanish into thin air just because the IMF loan is approved: asserts the IMF loan is like getting our necks into the noose first so that they would feed us thereafter: queries from where the social protection for the people is forthcoming.
Epidemiology Acting Chief Dr Samitha Ginige reassures the public that there is no danger of a listeriosis spread in the island: urges the public to refrain from creating undue fear regarding the bacterial infection.
IMF predicts that restructuring the public sector debt and bad loans in the private sector would cost around 6% of the 2022 GDP for Sri Lanka’s banking and finance sector: states this would require a capital infusion equal to that amount in order to cover the bad loans.
Rupee appreciates against the USD: buying rate at Rs.312.61 & selling rate at Rs.330.16: Gold prices also reduce by around Rs.10,000 with a 22-karat sovereign being quoted at Rs.152,000.
Colombo University Economics Senior Lecturer Dr Shanuka Senarath says SL is currently in an interval in hell: asserts this is just the tip of the iceberg and that all the problems are still under the carpet.
Colombo Grand Mosque says the Muslims in Sri Lanka will begin the month of Ramadan fasting from dawn on Friday, March 24.
1. A delegation of 19 Indian Armed Forces officers led by Group Captain Yunus Syed Muzaffar from the 46th Indian Higher Air Command Course conducted at College of Air Warfare, Secunderabad arrived in Sri Lanka as part of Strategic Study Tour from 20-24 March 2023. The visit is focused on interactions with senior defence hierarchy as well as visits to military establishments and industrial organizations to broaden the vision of the trainees.
2. The delegation started their visit by paying homage to the martyrs of Indian Peace Keeping Force at the memorial in Battaramulla followed by interactions with High Commissioner of India, H.E Gopal Baglay, Chief of Defence Staff, General Shavendra Silva and Air Marshal S.K Pathirana, Commander of Sri Lanka Air Force. The delegation is also scheduled to visit Galle, Hambantota, Diyatalawa, Kandy and Katunayake and interact with various agencies to get deeper insights about Sri Lanka.
3. India’s ‘Neighbourhood First’ Policy seeks to promote institutional linkages between the Armed Forces of India and Sri Lanka. Such Study Tours help strengthen the existing bonds of camaraderie and enhance people to people connect to achieve regional peace, security and stability.
Continuing his efforts to promote dialogue with Heads of Mission of Islamic countries concurrently accredited to Sri Lanka from New Delhi, High Commissioner of Sri Lanka to India Milinda Moragoda presented a copy of the Sinhala translation of the Holy Quran to the Ambassador of Bahrain to India Abdul Rahman bin Mohammed AlGaoud on 21 March 2023.
Earlier in February, High Commissioner Moragoda had presented copies of the Sinhala translation of the Holy Quran to the Ambassador of Morocco in India.
This Sinhala translation of the Holy Quran, published by the All Ceylon Jamiyyathul Ulama (ACJU) of Sri Lanka, was presented to the Bahraini Ambassador at the Embassy of Bahrain in New Delhi.
Previously, the High Commission had presented copies of the Sinhala Quran to the Jama Masjid of Delhi and the Jamiat Ulama-i-Hind (Council of Muslim Theologians of India).
In keeping with the “Integrated Country Strategy for Sri Lanka Diplomatic Missions in India”, the policy roadmap of High Commissioner Moragoda, the High Commission of Sri Lanka in New Delhi has been promoting dialogue with all major religions in India.
Without a major course correction in its economic trajectory and a significant “haircut” on its external debt, the country will likely be knocking on the door for another IMF pact. It could face another default in a few years.
The International Monetary Fund (IMF) executive board’s approval of loans is being celebrated in the elite quarters of Sri Lanka. The IMF’s recommendations have been implemented for close to a year, however, they have exacerbated the island nation’s economic depression.
The reality is that the IMF agreement and the limited funds that will be released in instalments will not alter the trajectory of a collapsing economy.
Given Sri Lanka’s default on its external debt in April 2022, the debt restructuring process, which is aimed at reducing its unsustainable debt levels, is likely to drag on for months, if not years.
Indeed, without a major course correction in Sri Lanka’s economic trajectory and a significant “haircut” – reduction of outstanding interest payments or a portion of a bond payable that will not be repaid – on its external debt, it will likely be knocking on the door for another IMF agreement. It could face another default in a few years.
The agreement is based on the same assumptions and projections rooted in the free market regime. But Sri Lanka’s challenge is not to return to the deep waters of a turbulent global economy. Instead, the country must identify avenues to increase domestic production of essential goods which its people need for survival. This includes strengthening the food system through local agricultural production.
Sri Lanka may find itself drowning in the dead weight of external debt if the process of achieving debt sustainability is predicated on integrating back into the global economy through more loans and hypothetical opportunities in the distant export markets.
Economic and political scenarios
At the heart of the problem is the conflation of the country’s two deficits: 1) the primary budget deficit, which consists of the government’s revenues versus expenditure, and 2) the current account deficit, which is the country’s foreign earnings versus expenditure.
The effects of the IMF-recommended austerity measures to meet a primary budget surplus target for 2024 can already be seen in the tremendous contraction of the economy in 2022.
Sri Lanka’s gross domestic product (GDP) contracted by 12.4% in the fourth quarter of 2022 alone. However, during the same quarter, the external balance had a surplus of $ 154 million. This happened mainly due to the prioritisation of imports, which for years the nation’s governments had avoided, because of the ideological “straitjacket“ of free trade.
Going forward, a focus on domestic investment and production, while managing the external sector, should be the strategy for reviving the country’s economy. But due to the IMF’s emphasis on a primary surplus and a free market regime, the opposite policies are being pursued. This strategy is inflicting tremendous suffering on the people.
The “straitjacket” approach of free trade attracts foreign capital, which includes a return to borrowings in the international capital markets. But wasn’t that one of the central causes of Sri Lanka’s economic crisis in the first place?
Sri Lanka’s high-interest loans and debt-financed capital inflows were repaid with the hard-earned foreign exchange of its working people. And that debt was invested in unproductive infrastructure and luxury real estate.
Therefore, there is little room for alternatives if Sri Lanka continues with the traditional crisis-fighting approach.
Furthermore, how will the state obtain taxes amid drastically declining real incomes? How can an already unpopular government politically afford to tax a shrinking pie?
The current approach to fiscal consolidation will inevitably hit a roadblock. In fact, the hidden agenda of the ruling elite seems to be a fire sale of public assets and tremendous wage repression. Significantly, the real incomes of people have drastically declined and millions have slipped into poverty. In addition, the privatisation of state assets to foreign entities will both fill the coffers of the treasury as well as bring in foreign capital that can be used to pay back external debt. However, this twinned strategy is bound to provoke a massive political backlash.
Sri Lanka has already witnessed the consequences of a destabilising economy last year. The country’s economic crisis, coupled with tremendous shortages of essential goods and price hikes, led to the overthrowing of President Gotabaya Rajapaksa. The current government led by Ranil Wickremesinghe has none of the advantages of its predecessor, in terms of a popular support base.
Wickremesinghe, and the elites he represents, however, appear content with repeating the process.
Worse, they refuse to even hold elections, in which they are bound to be hammered. They are instead pinning their hopes on more promises of external aid and investment, believing that such pronouncements would placate the citizenry.
The path laid out above is no doubt a recipe for disaster, but identifying alternatives requires understanding Sri Lanka in its historical and global setting.
When Sri Lanka defaulted on debt for the first time in its history last year, many analysts had spoken about drawing lessons for debt restructuring from other countries.
For instance, the case of the Latin Americandebt crisis of the 1980s. It may appear that Sri Lanka could bear the same process of structural adjustment. But the Latin American countries experiencing debt distress were incorporated into the expansion of global trade with the decade of hyper-globalisation in the early 1990s, albeit at great social cost and with long-term ramifications for inequality in their own societies.
However, Sri Lanka’s economic crisis has happened at a time when global growth has been slowing.
While there was a temporary recovery of trade in the aftermath of the COVID-19 pandemic, the long-term trend of slowing trade growth continues, aggravated by geopolitical tensions. Therefore, factoring in export-oriented growth opportunities, along with solutions for debt sustainability, must be looked at as per the prevailing global situation.
The Wickremesinghe-Rajapaksa government argue that the tax cuts by the then government in 2019 led to the economic crisis in the country. They further argue that this must be rescinded.
Amid declining income flows, the government is hiking taxes.
The problem, however, is that it is hard to generate revenues from a contracting economy with declining wages. Therefore, only a wealth tax on the stock of existing property and assets is realistic.
Of course, a wealth tax would also encounter fierce resistance from the elites who benefited from Sri Lanka’s neoliberal economic model. Indeed, they have long enjoyed the conspicuous consumption that drained the country’s external finances. There needs to be a redistributive approach focused on stabilising public finances by taxing the property and assets that the elite accumulated over the many decades since economic liberalisation began in the late 1970s.
In addition, amid tremendous price hikes and price volatility, there needs to be a public distribution system that prioritises the essential needs of the people who are on the brink of starvation.
Meanwhile, the lion’s share of Sri Lanka’s external debt is commercial borrowings, particularly international sovereign bonds. These bonds have high interest rates.
Sri Lanka’s bond holders earned high returns over the last decade. Their returns almost equalled their capital, particularly for the 10-year term sovereign bond. On the other hand, its own people have been paying these loans off for years now, by earning the country’s foreign exchange in sectors with little to no social protection. Meanwhile, the state cut back on social welfare spending and productive investment.
So what is the way forward? The debt restructuring process will likely take time.
The existing debt restructuring frameworks – such as the G20 Common Framework and the Debt Service Suspension Initiative (DSSI), which was agreed upon by Western countries as well as China and India to handle the debt distress of lower-income countries – have proven to be slow and limited.
Moreover, Sri Lanka’s profile is complicated by its categorisation as a “lower middle-income” country. It also has much higher level of foreign commercial borrowings than other countries that have obtained debt relief through similar initiatives.
A just mechanism must be developed for resolving sovereign debt crises, especially for the countries in the Global South.
A new and fairer global regime of trade and investment is necessary. There is a need to build on the work of the Sri Lankan economist Gamani Corea and many others, who, for example, came up with the proposal for the New International Economic Order in the 1970s, which the major powers led by the US refused to consider.
Countries, such as Sri Lanka, that have sunk into an economic crisis cannot wait for a new global financial architecture. Instead, this is the moment when alternative development financing arrangements must be considered, even as hegemonic powers are challenged to move away from demanding austerity measures for developing countries.
Moreover, for countries such as Sri Lanka, their long-term prospects lie in eventual engagement through new forms of South-South cooperation. However, the existing political alignments within regional powers and the nature of their elites, who continue to benefit from and are committed to free markets, block this path. Overcoming these obstacles and building solidarity within the Global South will take time.
Currently, there is a growing international focus on the ongoing wave of debt distress affecting over 50 countries and the absence of a credible mechanism to solve these issues. The discussions on these issues by progressive thinkers, trying to tackle the emerging debt crisis in their own countries, provide a glimmer of hope.
Can we do without the dogmatic economic ideologies that have been part of the capital’s strategy of economic repression and dispossession in the Global South?
This week, for example, a three-day consultation on debt restructuring in Colombo, mainly for economists from the Global South, will be organised by the International Development Economics Associates and the Law and Society Trust. This is one such initiative that is taking up the challenge of conceiving alternatives to the current austerity framework of debt restructuring, and the ongoing devastation it is causing.
If Sri Lanka cannot expect the same growth rates, and if it must make do with a much smaller economic pie, then the question of redistribution becomes even more urgent to ensure that its people can survive, and avoid any danger of starvation.
In addition, policies guiding investment into critical sectors such as agricultural production and the food system may not yield high returns, but they can help ensure survival.
There is an opportunity for a critical shift towards lower but sustainable growth, along with the resistance needed to push back against the dogmas of free trade and capital account convertibility.
By pursuing such a strategy, Sri Lanka can hopefully bring its current account deficit under control and avoid the market fluctuations and repeated crises that have been the hallmark of the neoliberal project around the world. In addition, Sri Lanka must sustain enough public expenditure to prevent its economy from going into a tailspin. That will require considerable redistribution, including measures like a wealth tax.
For Sri Lanka’s elites, along with its international partners, who continue to push the same failed neoliberal growth model, these ideas may seem too radical, or a step too far.
However, for those concerned with a just resolution of a widespread debt crisis and dispossession in the Global South, considering the paths taken and not taken in Sri Lanka may offer a preview of alternatives. That includes reconfiguring the basis on which debt restructuring occurs, along with the possibility of different arrangements for development financing. As the Global South faces another period of great turmoil, its progressive intellectuals should begin debating and promoting these alternatives.
Ahilan Kadirgamar is a political economist and a senior lecturer at the University of Jaffna. Devaka Gunawardena is a political economist and an independent researcher. Sinthuja Sritharan is an economist and an independent researcher.
