28 March, 2024

Blog

Government Mismanaging The Economy Unlike Kandiah’s Grocery Store

By Rajan Philips –

Last week’s Sunday Island carried an interesting quip in its political column, attributed to the UNP’s crisscrossing deputy leader, Karu Jayasuriya, while on his return journey from the government to the UNP: ‘the Rajapaksa government is being run like Kandiah’s grocery store’! The political columnist used the simile to describe the government’s Geneva fiasco. The simile is equally or more appropriate to the management of the national economy. Looked at it another way, the parallel is inappropriate as it is arguably an insult to the very successful management of what used to be the stereotyped Tamil shop in Wellawatte and in Pettah.
In the aftermath of the 1983 riots some of us used to meet periodically at Hector Abhyavardhana’s Chitra Lane home, mostly for fraternal political therapy after the shock of Black July. It was in fact the continuation of the Marx Centenary Committee that Osmund Jayaratne started earlier that year to commemorate the centenary of Marx’s death in March 1883. Almost the entire left spectrum – from Edmund Samarakoddy to N. Sanmugathasan (Shan) – attended those meetings. On one occasion, Shan brought up the subject of Tamil shops burnt out of business and reported the quiet rejoinder from some of the owners (‘Kandiahs’) whom he had met: “we will be back.”
Hector took over from where Shan left. The former People’s Bank Chairman and one of the two drafters (Hector and Bernard Soysa who were both named as ‘outsiders in the Finance Ministry’ by Felix Dias in parliament after the LSSP was expelled from the UF government) of NM’s budgets, characteristically went on to explain the economics of the Tamil shop. The Tamil shop, Hector said, relied on the volume and variety of sales, painstakingly stacking a wide variety of goods and selling them on very small margins to be competitive. A Tamil shop would hardly ever go broke or bankrupt. It kept its borrowing to the minimum even though its credit worthiness was always high with the banks as well as among private creditors. It could only be put out of business by setting fire to it.
95% unpatriotic
The same cannot be said of the national economy today, the keepers of which, unlike private business owners, print and supply new money apparently to help the economy but usually to make it worse. In Geneva, the government spoke from both sides of several mouths providing a sumptuous buffet of embarrassing contradictions. On the economic front at home, it is a case of too many cooks throwing each one’s special ingredient in the cauldron, the potions from which is making the people sick.
None of the ills of the economy –the free falling rupee, shrinking external reserves, growing trade deficit, falling revenue and rising expenditure, high debt repayment, market liquidity, business uncertainty, credit squeeze on small businesses, low prices for local producers, and high cost of living for all – can be attributed primarily to global economic forces. The ills are primarily the result of the government’s mismanagement of the economy.
While on paper government’s economic wizards keep painting rosy pictures of the economy, the peoples’ assessments of their own situations are quite the opposite. The economy grew at 8.3% last year, the highest ever, up from 8.0% in 2010. The per capita income went up from (US) $2,400 to $2,836. But in a Gallup global wellbeing survey, postwar, only 5% Sri Lankans consider themselves ‘thriving’, while 75% think they are ‘struggling’ and 20% feel they are suffering. Is somebody in the government going to say that 95% of Sri Lankans are not being patriotic?
The government has gone the full circle in taking contradictory measures in regard to exchange rate, balance of payment, government debt, and, above all, its showpiece area of infrastructure development. Last year, it sacrificed external reserves to sustain the rupee, devalued the rupee to enhance external reserves, and finally gave up on the rupee. In the budget, the presidential finance minister, rather his hidden hand, cut import duties on cars and trishaws, and now they have been raised but only selectively. For some time, the government was hesitant about accepting the remaining tranches of the IMF loan program, but in the end it could not do without it and has accepted the eighth and penultimate installment.
For the record, IMF’s resident representative in Sri Lanka, Koshy Mathai, has stated that the IMF was not a party to the recent increases in duties for vehicles. He managed to ‘speak up’ the economy by not seeing it to be in bad shape, but expects the growth in 2012 to drop to 7-7.5% and inflation to rise. Other observers expect the growth to drop even further – to 6%, and attribute the postwar spurt in economic growth numbers (from 5% during the conflict period) to increased expenditure in conflict areas. The point to note is that such expenditure while boosting growth statistics is not contributing to sustained economic development, nor is it appropriate to the basic needs of the conflict areas.
China in the saddle
Although the government did not meet the fiscal and monetary targets set by the IMF, it did other things such as free floating the rupee, increasing interest rates and hiking fuel and electricity prices to qualify for the latest IMF handout. The receipt of $426.8 million from IMF has pushed the foreign exchange reserves to $6.1 billion, which was once at $8 billion eight months ago. Worrisomely, the government’s short term debt including securities stands at $5 billion, or 80% of the reserves. The current account deficit is at 7.8% of GDP, while the trade deficit has more than doubled from $4.88 billion in 2010 to $10 billion in 2011. This leaves foreign remittances insufficient for the government to use them to bridge the trade deficit.
Except for raising interest rates, import duties and prices, the government does not appear to be doing anything credible to increase revenue and cut expenditure. Increasing interest rates and prices is creating more problems for the economy and hardship for the people. For example, playing yo-yo with import duties on vehicles, while it is not enough to protect external reserves, has thrown a big section of the import sector into uncertainty and has hit hard the lower strata of the population relying on three wheelers for income and mobility. A major part of any long term solution would involve increasing the export earnings, but the government does not appear to be having any strategic plans for helping with the two main export sectors: garment and tea. Nor does it have any strategy to help the small export industries that have been developing on their own initiative. Industries that produce for the local market, which already have to compete with cheaper imports from India and China, will now be affected by the credit squeeze on consumers.
Reducing expenditure has to start with defence but that seems to be a non-starter. The government is spending more on defence ($300 billion) than the combined expenditure ($230 billion) on health and education, which should be the areas to invest for the future. The defence expenditure is now being justified by the non-military work that armed forces are being ordered to perform – from street cleaning to renovating the Central Bank building. This is neither here nor there economically, but anything goes in Sri Lanka.
The government’s plans for urban land and infrastructure development using Chinese help are also questionable. One of the reasons for the balance of payment crisis is the increasing import bill for infrastructure projects funded by foreign loans. So the government is working at cross purposes in enforcing credit squeeze to curtail imports while allowing infrastructure projects to continue at high import costs. The Ministry of Industry and Commerce has reportedly quoted a “businesswoman from China” about plans to invest $50 billion over 5-10 years to build another piece white elephant infrastructure in Hambantota – this time a new trade port! If true, China appears to be in the saddle driving Sri Lanka’s development and infrastructure.
The news from the Treasury is that the government is going to encourage the private sector to play a major role in undertaking all future infrastructure projects. The most needed infrastructure projects are water supply (55% of the population has no pipe water), sewage collection and treatment (currently serving only 2.5% of the population), and storm water management facilities to control the flooding problem. The Treasury estimates that $15-20 billion will be required for providing water supply and sewage system nationally, and $65 billion will be needed to develop 64,000 km of national roadways.
Given these needs and estimates, why would anyone in their right mind think of building a trade port in Hambantota for $50 billion? The way things are going, Hambantota will be chockablock with infrastructure of little use, while other places will be chockablock with people without facilities. Even those at Kandiah’s grocery store will know that this is not the way to run an economy.

Print Friendly, PDF & Email

Latest comments

  • 0
    0

    “The government is spending more on defence ($300 billion) than the combined expenditure ($230 billion) on health and education” This is the crux of the matter. We have a armed force that is surplus to requirement. The authorities just cannot demob the defense forces & expect them to find alternative employment. War finished 3 years ago, within the first year of victory comprehensive plans should have been in place to arrange demob. Otherwise we will have another insurrection on our hands.

  • 0
    0

    @ Denzil Washington,

    So then it’s easy LTTE to make a come back as all sings are now there to that effect.

    • 0
      0

      Morgan = You obviously work for Sri Lankan defence forces. It is quite obvious for any idiot to understand a country like ours cannot afford to have defense establishment of the size we have. We have to make this country a place of co-habitation for people of all races & creed. For that you must have the political will. Up to two years ago I had the belief that UPFA can do it. But I am sorry they just lost their head. They think now they can walk on water! Sad but it is true.
      PS: (I have got 2 Oscars, 2 Golden Globes & a Tony. You got a Oscar, a Golden Globe & a Screen actors Guild + You are seasoned aviator, you should know how much it costs to run SLAF! )

      • 0
        0

        Denzil
        You want to make a come back?It’s time to flush out the remaining Tamil Tiger terrorists.Come on buddy.We have more in store for you in Nandikadal fashion.

  • 0
    0

    elections are wining by GOSL what else?people love the KANDIAHS GROCERY management

  • 0
    0

    Colombo Telegraph website is abused by people who write using bogus names. This would in the long run destroy the value and service CT is now providing.

    CT editors need to develop a method to prevent this habit. What people now do is not press freedom. If a person is unable or afraid to disclse his/her name that person’s views have no value or impact other than degenerating the medium freely provided by CT.

    • 0
      0

      People are afraid of abductions.

      • 0
        0

        The staged managed ones like Bomba Gundas?

        • 0
          0

          The ones like that SLFP/politician Sagara Senaratne.

          (Brothers knew who to contact for release)

    • 0
      0

      Mr Wijewicrema – Wake up man, we are in the 21st century. Age of blogs, forums etc. we as a rule use pseudonyms. We may abuse each other by way of the comments we make – which usual banter in this sort of forums. Get a life understand the real world we live in. Thank you

  • 0
    0

    This man MR is an insult to this Nation with his compatriot and cahoot Cabraal. Look at MR kissing his Talisman holding in his hand which he believes will save him from the wrath of the masses the day he will be kicked out, election or no election.

    • 0
      0

      wait for people kick out MR just watch one more time youtube face of loving praba at nandikadal.good luck for diaspora.

  • 0
    0

    The economy grew at 8.3% last year, the highest ever, up from 8.0% in 2010.

    You have to ask yourself where that growth came from. The usual equation for GDP is Y = C + G + I + NX, where C is consumption, G is government spending, I is investment, and NX is the difference between exports and imports. It’s not too far-fetched to surmise that most of the so-called growth came from government spending. After all, the standard of living did not increase that much, due to the average worker’s income not keeping up with the increase in inflation, so there is no perceptible rise in the average income of the consumer which would preclude an increase in consumption. Exports were actually down, due to loss of GSP+ privileges and a decline in global demand for Sri Lankan tea. Investment – again, no major increase. In other words, when the Central Bank boasts about 8.3% economic growth, one should look at the source of that growth. It can be a misleading figure, because it only refers to the market value of the output produced by a nation; it says nothing about the standard of living. One should also question the accuracy of such a figure; which is an entirely different matter. How the data was gathered and what not.

    By the way, is it possible for CT to remove me from the “waiting list” for comments? I regret any earlier misunderstandings; you must understand that the two characters I referred to in an earlier thread are only there to start useless fights. I tried my best to ignore them, but there is a limit to that; hopefully the issue is now resolved. I am keen to educate other readers about certain issues; for example economics, which is one of my specialties.

    • 0
      0

      Observer,
      You claim that economics is your specialties and that you are keen to educate others.That’s pretty interesting.Why,have you had enough of verbally assaulting and murdering the Srilankan president and his family? Why don’t you join Rudrakumaran’s outfit as an economic adviser?In the guise of educating others on your wisdom of economics,there’s no doubt that you are planning to insult the country,the president and the people in a different front.PL stick to your present style of abuse and insult.We have enough gas in the tank to take you on.Observer the Tamil Ealam economic adviser!

      • 0
        0

        Are you saying your cardboard hero Rajapakse deserves any respect? At least, if he retired honourably after May 2009, one could argue for a different view. But his motivations are clear after , than before. To fully militarize all aspects of society and to sell the country off to the highest bidder (China), while in the process creating a family dynasty. The Gandhi’s are the most corrupt family in India; they are worth billions of USD already. The Rajapakse’s are the most crooked family in SL; no doubt, they are already worth several million.

        • 0
          0

          Observer
          Brilliant comment. The cardboard hero Rajapakse runs cardboard economy in Sri Lanka with incompetent cronies based on lies and corruption.

  • 0
    0

    In his Darwin Speech, Brian Senewiratne predicts that this huge army will be used against all the working people, presumably when the economic sh*t hits the fan. I fear he may be right.

    • 0
      0

      Rory,
      Are you planning to join Ole Doc Brian in the nut house?We will take care of the country’s economy.You better take care of the economy of the the Tamil Tiger terrorists.I am sure that they could do a bit of advice from you now that they are finding it difficult to survive specially as their extortion and credit card fraud enterprises are having a tough time.

    • 0
      0

      All these despots try to cultivate the Forces and maintain them at the cost to society in comfort, believing the Forces will protect these Corrupt Despots. It was an ideal opportunity which was mapped out by the corrupt American regiem with the forced support of the Indians to liquidate the LTTE in the eyes of the people, for the Forces to earn the respect of the masses winnig the Staged War.
      ‘Api Wenuen Api’ was a concept to mesmerise the masses to recognise the Forces as their saviours. The same goes for the regiems of Socialist and Communist countries as China, Russia and a host of others in the world where the corrupt and downtrodden have come to govern the masses to uplift them, instead have made wealth for themselves and are ruling the masses with force using their Forces. The same has happened here where the Rajapaksas sixty years ago were non entities with no specific wealth to boast of. But today the Rajapaksas are the most richest in society, with illgotten wealth and are expecting the Forces to protect and look after them. Well the day the masses realise the bluff and turn against them, not even the Forces can save him or the family.

      • 0
        0

        Thank you. Well said. By the way Max has gone to the temple! We will see the explosion of his bird brain mind after his rituals.

        • 0
          0

          Denzil,
          It seems that there is no life without me for you,eh!It has been my practice to pay homage at the Temple everyday.Though you defeated Tamil Tiger terrorists abuse me at every turn,i take it very lightly due to my mind being disciplined.As for you i understand your sorrow of loosing that wonderful human being “Velu”so early in life at Nandikadal,may i suggest you take up meditating.Pl convey my message to your defeated Tiger friends.Defeat must be really bitter,eh!But don’t bang your head on the wall,instead pl abuse me.I am there to help you overcome this miserable crisis.

  • 0
    0

    I went trough your entire text of letter,its seems to old type of crtitizing path of CAPITALISM.In fact you have to understand since 1948 to 56 our economy was under colonial patten.In 1956 certain changes had not meet demand of capitalist path of independence developement.You have stydu more path of econimic developeme futher more.Sorry to please read GVS De Silve NEW PUBILCAION will give more food for thought.

  • 0
    0

    Economic equations are not substitutes for democratic debates about how to run society. Economics is a ‘positive science’ – one based on facts rather than values. Politicians are entitled to their preferences, so the argument went, but economists are supposed to give them impartial advice based on an objective examination of the facts.

    Positive science does not offer any kind of suggestions regarding the facts. Economics deals with the study of what economic activities are. What they were. What they would be. Economics may indicate what the rate of wage is and how the rate is fixed. What economics may not indicate is what the rate of wage should.

    Most of the major economic social or political problems, poverty, unemployment, price hike, arises due mainly to economic causes. It can be removed only through, deliberate and sustainable way organizing and utilizing resources in the best known way to the maximum advantage to the people.
    Shelton Dharmaratne.

    • 0
      0

      You are correct that economic theory and public policy are distinct. However, economic theory provides a better roadmap for forming public policy, than do considerations based on Sinhala-Buddhist chauvinism. For example, an economist writing about the causes of inflation in a newspaper renders a more valuable service to the public than does a monk explaining why the island should be united at any cost (and the newspapers are full of monks making such declarations). The point is that economics is in touch with the modern world, whereas conspiracy theories, horoscopes, Jathika Chinthanaya, bodhi pooja, and “homegrown solutions” – which are all part and parcel of Sri Lankan politics these days – does not.

      • 0
        0

        Observer

        Thanks for awesome comment !!

        The only thing Rajapaksas are good at…is homegrown mass murder of the innocent, clever manipulation of the gullible Sri Lanka voters and unending false promises or outright lies !!

        • 0
          0

          Let us be clear. The Rajapakse’s had a plan to win the war, but no plan to improve the economy. This is true because the first step in improving the economy would have been to disband the military. A developing nation like Sri Lanka cannot sustain very high military expenditure – as a % of GDP – without serious long-term consequences. At a more fundamental level, it is a question of whether government spending is encouraging the growth of the private sector and improving the productivity of the labor force. The Rajapakse’s have not done well in either regard. They have actually subsidized military-run businesses in the North, meaning there is a potential for monopolies. Also, the number of checkpoints in the North is staggering. If one needs permission from the MofD to transport goods, then this is a major cost, and an inefficient use of resources (because so much time is being wasted getting the permission). There is also the question of capital. The military is occupying some of the best land in the North. Again, this is a waste of resources because the military is not competing in any free market. Usually what happens in these kinds of situations is that a black market arises. There are some kinds of items that the consumer will always demand. But if there are very few suppliers, the consumer will end up paying a premium to middlemen. Or in another case, in order to accelerate the process of getting permission from the military to do business, certain military officials will probably be bribed; a black market will arise for permits.

          A good economic plan would have been to get the local community employed in reconstruction work, instead of confining them to a subsistence-type existence in IDP camps. The money would have been channeled back to the local community, which means local consumers would have spent more, in effect encouraging local businesses to grow. The idea of letting the Chinese do most of the reconstruction work, smells of corruption to me. We can guess where the kickbacks and commissions are going.

        • 0
          0

          Observer
          Thanks for your perceptive post.
          When Rajapaksa came to power there was a ceasefire. Rajapaksa started this brutal war. The war continues Rajapaksa in the form of “white van ” abductions. One “white van” abduction victim, the opposition political activist Attygalle is accusing the Rajapaksa Government Forces for her horrifying ordeal. I think, she is correct in her accusations. Pro-Rajapaksa paramilitaries: Karuna, Douglas D, Pillayan are heavily involved in “White Van” abductions too. White van “disappearances for ransom” is very lucrative. Now it is become an industry where the opposition political activists are “disappeared” presumed dead or some “disappeared” to collect ransoms.

          White van “disappearances for ransom” is overtly a racket milking Tamil cash cows there is also a hidden aspect.

          In July 1983 organized mobs consisting mainly of Sinhala – speaking hoodlums looted and destroyed Tamil businesses.

          Despite that blow the resilient Tamil people have bounced back and have carved out their niche once again in Sri Lankan commerce.

          What is happening now is another “silent” July 1983.

          The business concerns are not physically destroyed but Tamil businessmen are being systematically wiped out. Tamil owned or controlled commerce is rapidly eroding.

          The “enforced disappearances” of most affluent Tamils are not political or related to counter – terrorist procedures.

          These are nothing but extortion related abductions.

          The actual number of incidents are not reported to the Police or even organizations like the Civil Monitoring Commission.

          Many people negotiate on their own and get their loved ones released through paying a reduced sum.

          They later keep silent.

          In many cases the ransom paid is so great that continuing with business becomes impossible.

          Some are forced to sell off property to collect ransom money.

          Also some who get released feel so insecure that they transfer their businesses to someone else and leave the country.

          There are also many businessmen who have run off to India, Singapore, Malaysia, Thailand, Middle – East and Western nations to escape being victimised.

          The “white van” abductions or slow strangulation of the Tamil businesses is not being done by Sinhala mobs like in July 1983 but by main three Pro-Rajapaksa Paramilitary Groups:1. Karuna, 2.Pillayan, 3.Douglas D.

          The actual abductions are generally done by the Karuna, Pillayan or Douglas D groups. There is close collaboration by sections of the Police and armed forces and intelligence personnel.

          Some top “security” guy is usually at hand to help out if something goes wrong. It is also believed that a percentage of the ill – gained loot is given to these sections.

          In some instances the Tamil groups pay “bribes” to get things done. There is corruption or collaboration by the Police or Armed forces in this sordid activity.

          What is frightening about this racket is suspected connivance and condonement at very high levels.

          At least one cabinet minister has demanded and received money for the release of abducted persons.

          There are also instances of the families and relatives of abducted persons obtaining their releases through contacts at very, very high levels of Government. It is said that the only sure guarantee of getting one released is to gain the sympathy of family members of a powerful political dynasty.

          ————————————–
          Below the incomplete list of the Victims of the “white van” abductions:
          – A Tamil multi – millionaire businessman accused of attempting to de–fraud Customs goes “missing” in Colombo after he threatens to expose involvement of people in high places in corrupt activity. Ransom is demanded and distraught family members pay more than three crores of rupees to two Tamil political groups for the return of the man who is a diabetic. But the missing person who phoned last from Polonnaruwa district is yet to return despite the huge amount paid.

          – The vice – chancellor of an Eastern university is threatened by an armed Pro-Rajapaksa amil group and moves to Colombo. His resignation is not accepted by the UGC. The VC attends a top academic conference in a high – security area of Colombo. He is last seen around noon at the venue. Many appeals have been issued and representations have been made to the President himself but the man who went missing many weeks ago remains in the ranks of the “disappeared”.

          – The Colombo district organizer of an Up Country Peoples party goes missing in Colombo. Within 48 hours of his disappearance the party concerned crosses over from the opposition to the Government. One MP becomes cabinet minister and another deputy – minister. But the “disappeared” organizer is still missing.

          – A young Tamil woman working as financial executive of an airline firm is abducted by unknown persons from her residence in Borupane road, Ratmalana.

          -2 Tamil prominent businessmen – brothers in law – in the jewellery trade return home in a car. The vehicle stops at a Police check point. Two men get in with arms and the vehicle speeds off. One of the businessmen a heart patient is dropped off soon. A ransom is demanded. Negotiations take place and a sum is paid. The missing man returns home. The family keeps “mum”.

          -2 Tamil businessmen – brothers in law – in the jewellery trade return home in a car. The vehicle stops at a Police check point. Two men get in with arms and the vehicle speeds off. One of the businessmen a heart patient is dropped off soon. A ransom is demanded. Negotiations take place and a sum is paid. The missing man returns home. The family keeps “mum”.

          – A well – known Tamil broadcaster is abducted on his way to work. He is taken blind- folded to an unknown destination and quizzed by people. The Indian High Commission exerts maximum pressure to get him released. The Indian envoy of that time speaks to President Rajapakse directly. The broadcaster is released with the stern warning that he should not open his mouth.

          – A Tamil Christian evangelical pastor from Vavuniya district, his two sons and another are on their way to Colombo. They are last seen at the Negombo bus stand. They are reported missing and have been classified as “disappeared”.

          – A Tamil businessman and his employee go missing. His family is informed by his abductors that a hefty amount has to be paid. They are advised to sell off the business and pay up. Meanwhile some relatives have links to “Saffronist” politicians. Through these connections an appeal is made to a powerful personality in defence circles. The man and his employee are released from a camp in the Eastern province.

          – A Tamil entrepreneur living in a Western Country goes to Colombo because a family member is terminally ill. His vehicle is stopped at the Negombo road junction by cadres from Pro-Rajapaksa Karuna Group in a pick up truck. The relative driving him home from the airport is told to keep his mouth shut. Later a massive sum is demanded for his release. The telephone calls are made from Sri Lanka to the foreign country where the family lives.Negotiations are currently on to reduce the sum demanded.

          -A Tamil woman teacher is abducted By Pro-Rajapaksa Douglas D. group in Vavuniya. Her family is middle – class and does not have the ransom demanded for release. But her abductors are well aware of her close relatives abroad and what their financial status. The relatives are asked to pay up. After bargaining an agreed amount is paid and the woman freed.

  • 0
    0

    REASON FOR ALL OF THIS MISMANAGEMENT IS UNEDUCATED CRIMINAL CROOK ARE RULING THE COUNTRY TODAY AND THE THEIR APPOINTMENT’S ARE NOT BASED ON QUANTIFICATION OR EXPERIENCE IT IS PURELY BASED ON POLITICAL INFLUENCE

  • 0
    0

    I’ll not speak about your competence, the write-up basically disgusting

Leave A Comment

Comments should not exceed 200 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically disabled after 5 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.