The Janatha Vimukthi Peramuna (JVP) organised a public rally and a protest in Colombo, Anuradhapura and Matara, in celebration of the May Day today (01).

Themed ‘Let’s oust the oppressive government and build a people’s government,’ the protest and the rally were attended by many political and civil activists.

MIAP

Nirupama Subramanian writes: Crippled by an acute shortage of dollars, Sri Lanka has restricted all its imports, including essential food items. At the time Kurien ventured into Sri Lanka, the country’s annual milk powder import bill was $60 million.

By Nirupama Subramanian

It was sometime in 1997. In Colombo, in the basement banquet hall of a five-star hotel, the “milk man of India” was addressing a press conference to announce a $20 million joint venture between the National Dairy Development Board and Sri Lanka’s state-owned MILCO. It would be called Kiriya — kiri being the Sinhalese word for milk. Varghese Kurien was upbeat about his new project. He had come at the invitation of then President Chandirka Bandaranaike Kumaratunga. He said the aim was to make Sri Lanka self-sufficient in milk. We want to replicate Operation Flood here, he said.

By then, I had been about a year or so in Colombo as the Sri Lanka correspondent of The Indian Express, long enough to realise that fresh milk was an exotic commodity, and milk powder ruled the market — rows of neatly stacked packs of full-cream milk powder on supermarket shelves, and in the refrigerated sections, tubs of creamy yoghurt made with imported milk powder, and a full range of cheese, all flown in from Europe and Down Under. My lasting memory of a first meeting with a Tamil militant leader-turned-mainstream politician in Colombo is of him sitting in the basement of his well-guarded fortress-like home, his back to the wall with a clear view of the bunker’s metal door, munching crackers with cubes of Kraft cheese.

At the press conference, I had made bold to ask Kurien if he was aware of the import lobbies in Sri Lanka and how much of a fightback he expected from them. His reply was something to the effect that he had faced bigger challenges in India, and this was no problem at all.

Many times during a recent trip to Colombo, my mind went back to that brief encounter as I heard about the milk powder scarcity, secretive WhatsApp tipoffs from groceries to loyal customers about fresh arrivals, the jacked-up rates for a 400 gm packet, children having to go without milk, and tea kades offering only black tea.

Crippled by an acute shortage of dollars, Sri Lanka has restricted all its imports, including essential food items. At the time Kurien ventured into Sri Lanka, the country’s annual milk powder import bill was $60 million. In 2021, dairy imports accounted for $317 million of Sri Lanka’s total consumer goods imports of $1.6 bn (the total imports in 2021 were $21 bn, of which non-fuel imports were $16bn).

Kiriya was never able to get off the ground. Union action over wages, hours of work, hirings and firings kept the three MILCO processing plants non-operational or functioning at levels much less than their capacity as to make them unsustainable. Influential ruling party politicians controlled the unions (as an aside, two decades later, it was again trade unions that ensured that the Rajapaksa government cancelled the tripartite agreement with India and Japan for the joint development of the East Container Terminal by paralysing work at Colombo Port for weeks on end).

Indian NDDB officials who had been sent over to run Kiriya were clearly unprepared for the extent of opposition. It was well understood by all that milk powder lobbies were hard at work to ensure there would be no “white revolution” in Sri Lanka. On one particularly bad day, the Indian managers at Kiriya had to hastily leave the premises as workers set up a menacing chant of “India Go Back”.

“All we know is that we are up against very powerful forces. The stakes are very high,” one official told me at the time.

Various other reasons were also forwarded for Kiriya’s failure — Sri Lanka does not have a pastoral tradition, its limited arable land cannot be used for growing fodder and grazing, and Sri Lankans love their coconut milk and have no special affinity to dairy milk, or cuisine that uses milk products. But Sri Lanka’s milk consumption has steadily grown since the 1980s, when the country introduced free market polices that opened the doors to unrestricted imports, and as the demand for milk grew among the country’s urban wealthy.

According to an appraisal of the dairy sector commissioned by Sri Lanka’s Ministry of Livestock Development and Estate Infrastructure and NDDB in 1998, the per capita consumption of milk and milk products in Sri Lanka, which was about 13 kg in 1981, had increased to 36 kg by 1996, low compared to India and Pakistan, but at the time close to the medically recommended 41.6 kg.

The dairy sector itself is tiny. There was some talk of strengthening it in the mid-2000s when the government’s move to raise the price of milk powder to set off the huge import bill met with political opposition. The plan included refurbishing the three MILCO plants that Kiriya had taken over and failed to turn around. But nothing came of it. Imported milk powder continued to fill the gap. Sri Lanka is to this day a great milch cow for the world’s milk multinationals.

It is bitter irony that Colombo has put in orders for milk powder and dairy products under the emergency $1 bn food and commodities credit line extended to it by India. That might be vindication for NDDB. In Sri Lanka, some see the present crisis as an opportunity to learn lessons about self-sufficiency at least in low-hanging sectors, including the dairy sector. It won’t be easy but it is definitely worth a shot.

The IndianExpress

The trade unions devoted to the Sri Lanka Podujana Peramuna (SLPP) is currently holding a May Day rally at the Ananda Samarakoon Outdoor Stadium in Nugegoda in support to President Gotabaya Rajapaksa and Mahinda Rajapaksa.

Themed ‘Janawarama Surakimu – Abhiyoga Jayagamu’ (Let’s Protect the Mandate and Win the Challenges), the May Day rally has been jointly organised by the United Trade Union Confederation and the Podujana Pragathisheeli Trade Union Federation.

Dinesh Gunawardena, Gamini Lokuge and other senior government politicians, Labour Minister Vidura Wickramanayake, MPs, representatives of Provincial Councils and Pradeshiya Sabhas as well as many trade union leaders and representatives affiliated to the SLPP are also present at the rally.

MIAP

Sri Lanka has sharply increased prices of commonly used medication, the second such rise in six weeks, as it struggles to deal with an economic crisis.

Antibiotics, certain painkillers and medication for heart conditions are among those hit by a 40% mark-up.

Sri Lankans have had to take short courses of medicines or look overseas for supplies.

The government says it has no other option than to increase the cost of pharmaceutical products.

It follows measures to help slow the depletion of foreign exchange reserves amid a crippling financial crisis.

Among the measures were restrictions or bans on the import of some essential goods, including foods and medicines.

“This is not something that government is doing willingly,” Nalaka Godahewa, Sri Lanka’s minister for mass media told the BBC.

He said the devaluation of the rupee and the fact that most medicine is imported by the private sector meant the government had no choice, otherwise there would be a serious shortage.

Health professionals are worried that the scarcity of medicine is forcing people to buy less than the prescribed limit.

“The situation is bad. Sometimes antibiotics are prescribed for five days. Now my customers are saying give me the antibiotics only for two or three days. How will it work?” Ruchira Hewawasam, who runs a pharmacy in Colombo, said.

Some fear that even for those willing and able to pay higher prices, some medication is in short supply.

Velupillai Wigneswaran who lives in the central Ratnapura district, has been trying to find prescription tablets for his sister, who suffers from a serious neurological disorder, for the past year.

“We tried several pharmacies but the medicines are not available. Doctors have advised us not to take different medicine. We are trying to get the tablets from India through our friends,” he said.

Without the medicine, Mr Wigneswaran said his sister was suffering and he was not sure what will happen to her health.

“The crisis we are facing in the pharmaceutical sector is unprecedented. The sharp increase in medicine prices will take its toll,” Azam Jaward, Vice President of Sri Lanka Chamber of Pharmaceutical Industry told the BBC.

Antibiotics for paediatrics, life-saving anti-biotics, steroids are among the medicines are difficult to obtain.

This comes against the backdrop of explosive public anger at the rising prices of other essential items such as cooking gas, milk powder and fuel.

Thousands of people have been protesting against the worsening shortage and calling for the government to resign.

India has offered to supply medicines as part of a loan programme. But that process has been slowed down due to bureaucratic hurdles.

The government has approached international agencies like the World Bank to help buy essential items like medicines.

“They have already told us something like $600 million will be coming forth and when that comes we should be able to bring some of these prices down,” Mr Godahewa said.

BBC

When the US imposed a global ban on sales of advanced semiconductor chips incorporating sensitive US-sourced technology to Huawei two years ago, Paul Trilio, head of geotechnology at Eurasia Group, described it as a “lethal blow to China’s most important technology company,” which he projected would impact all of the company’s business lines.

Notwithstanding these dire projections, Huawei’s 2021 financial results posted at the end of March demonstrate that, to paraphrase Mark Twain, the rumors of the company’s demise have been greatly exaggerated. 

Hampered by the chip ban, as well as by “supply continuity challenges” and slowing 5G (fifth-generation telecom technology) demand in China, the company’s overall revenues did decline 28.5% year on year from 891.3 billion yuan in 2020 to 636.8 billion yuan (US$96.4 billion) in 2021, marking the first drop in annual revenues for the company dating back to 2002, according to reports published by the company.

However, Huawei’s net profits surged from 64.6 billion yuan in 2020 to a record of 113.7 billion yuan ($17.22 billion) in 2021, a remarkable 75.9% jump. The company attributed the gains in profitability to investments in innovation, improvements to operating efficiency and rebalancing of its product lines to focus on more profitable business segments that are not affected by the sanctions.

The impact of the chip ban has been felt most keenly in Huawei’s smartphone business, where according to research firm Dell’Oro Group, the company’s share of the global market experienced a precipitous 81.6% decline year on year in 2021, dropping the company’s global market share to only 3%, falling well behind rivals Samsung, Apple, Xiaomi, Oppo and Vivo. 

Huawei had been ranked third globally in handset sales in 2020, shipping 170 million handsets, as the company drew down on its stockpiles of chips accumulated prior to the chip ban taking effect. Huawei spun off its budget handset unit Honor in late 2020, which also impacted smartphone sales.

Huawei retains top spot in 5G infrastructure

The focus of the chip ban, however, has always been Huawei’s 5G base-station business, which the US has targeted on the grounds that the company’s network equipment poses a national-security risk. The US has persuaded many of its allies to follow suit and ban Huawei equipment from their 5G networks. 

However, the US has never published any evidence to support the claim that Huawei has actively facilitated espionage activities by Chinese spy agencies, and critics have expressed concerns that the US campaign against Huawei may be driven principally by competitive interests, rather than national-security interests, given Huawei’s dominant position in 5G globally. 

When Huawei chief financial officer Meng Wanzhou was taken into custody in Canada at the request of US officials in December 2018, at the same time that the US was endeavoring to persuade Canada to ban Huawei 5G equipment, the Financial Times observed that her arrest risked being interpreted as “the use of American power to pursue political and economic ends rather than straightforward law enforcement.” 

The release of Meng last September, with little more than a slap on the wrist, has only reinforced these concerns. 

If the chip ban was intended to cripple Huawei’s ability to compete in the 5G infrastructure market, then it can only be viewed only as a failure to date, as the company still takes the top spot in the global rankings according to Dell’Oro Group, with a 28.7% global market share in 2021, nearly equaling the combined market share of Ericsson and Nokia, its closest two competitors. 

However, some industry analysts predict that Huawei will face increasing headwinds going forward – the company’s share of the global 5G base-station market peaked at the start of the first quarter of 2020 and experienced a marked decline through mid-2021, and signs point to the potential for further significant declines in market share outside of China as more European Union countries are expected to join the US ban of Huawei 5G equipment.

But the cost of banning Huawei is increasing. This year, the US Federal Communications Commission (FCC) reported that estimated costs for “ripping and replacing” Huawei and ZTE equipment in the US had risen from $1.8 billion to $5.6 billion. 

The ban is also impacting network coverage in rural America, where Chinese network equipment has had a 25% market share. The UK and EU are facing calls for delays in removing Huawei kit from their telecommunications networks, for similar reasons.

Even if the US-led ban among key Western countries holds, there are still many positive signs for Huawei’s 5G prospects globally. 

In June last year, London-based think-tank the Overseas Development Institute (ODI) concluded that “a common security policy towards Chinese investment in digital infrastructure is unlikely.” 

The study added that “growing concerns about technology dependence are prompting some wealthier developed countries to reassess engagement with China in digital infrastructure construction, but poorer developing countries appear reluctant to follow suit.”

ODI noted that Huawei is able to leverage its price advantage coupled with policy loans from leading Chinese banks to beat the competition in many emerging markets, citing reports, for example, that Huawei and ZTE account for up to 60% of wireless-equipment sales in Africa and the Middle East. Other analysts have similarly found that developing economies continue to welcome Huawei kit. 

As reported by Forbes, Counterpoint Research and smartphone brand Realme have projected that after 5G adoption rates in developed markets reach 80-90% in the next few years, then the next wave of dramatic growth for 5G will be driven by emerging markets with large populations of increasingly connected young consumers. These are the markets Huawei is poised to dominate.

Innovating around the chip ban

Although the chip ban still impacts Huawei’s 5G infrastructure business, base-station equipment requires fewer semiconductors than smartphones, and the company was able to stockpile sufficient components to sustain production over the short term. 

Both the Chinese government and Huawei want to achieve self-sufficiency in semiconductors, but this has proved to be an elusive goal, which cannot be attained in the near term.

However, at the recent press conference announcing the 2021 annual report, Huawei’s rotating chairman Guo Ping hinted that more innovations were in store to help mitigate the impact of the chip ban, indicating that the company would begin using advanced chip-packaging technology. Chinese industry experts at the World Semiconductor Conference held in Nanjing in June of last year had called on the company to pursue the technology. 

Speaking to the South China Morning Post, chip-packaging technology expert Wang Min explained that Huawei may be able to use one of two possible solutions to work around the US chip ban: First, the company can “use larger nodes to produce chips at the expense of power consumption,” or alternatively, it can “assemble different types of chips that can bought in an SiP [system in package] to make a complete final chip.” 

This SiP option also sacrifices power consumption, according to Wang, but it has a shorter development cycle and lower overall costs.

The natural limitations of sanctions

While such a technology work-around could circumvent the ban on Huawei’s purchases of advanced semiconductor chips, it would not address the current ban on procurement of Huawei 5G kit in much of the developed world. 

But as noted, this still leaves open the markets with the highest future growth potential in the vast majority of countries around the world that do not share the network-security concerns raised (but not publicly substantiated) by the US.

Moreover, many of these same countries view the unprecedented financial sanctions imposed on Russia by the West with increased wariness, accelerating the growing de-dollarization trend in an effort to avoid “financial excommunication” if they were to cross any of the intentionally veiled red lines set by the US. 

This in turn may make it even more challenging for the US to persuade less developed countries to join the Huawei 5G ban if this is seen as a further example of the US weaponizing its dominant position in the global system rather than functioning as a fiduciary of that system for the benefit of all market participants. 

Huawei has now demonstrated that business strategy and technical innovation can be another arrow in the sanctions countermeasures quiver at the corporate level, as the company reinvents itself to ensure that it not only can continue to survive the short-term impact of the sanctions but also position itself to thrive in the medium to longer term when market dynamics turn more to its favor.

Against that backdrop, it is perhaps noteworthy that the company’s 2021 financial results were announced by CFO Meng Wanzhou, in her first major public appearance since her release – an apt symbol of Huawei’s phoenix-like rise from the ashes of what were expected by industry experts to be ruinous sanctions. 

Far from suffering a “lethal blow” from the sanctions, by successfully negotiating its way through the sanctions minefield, Huawei may in fact have provided another demonstration of the natural limits of economic sanctions.

ASIA TIMES