11 December, 2017

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Maithri’s Manifesto Launched: It Is For Provider Government With A Vision

By Hema Senanayake

Hema Senanayake

Hema Senanayake

The government could be an economic facilitator or provider. Economists usually prefer to have a facilitator government due to a fundamental reason which is linked to an efficiency factor. However, what Maithri has promised us is a “Provider” government at least in the first 100 days, but it has a vision. That would be a better beginning in view of the economic difficulties faced by wage earners and businesses of all categories except a few. But a gradual transition to a more facilitating role would be a must in order to ensure a vibrant and dynamic economy.

The manifesto published in the language of Sinhala is an interesting document. In the document there are 100 promises which are to be implemented within the first 100 days. For example, the very first proposal is to increase salaries of government employees by Rs. 10,000/= per month and half of it would be paid with the February salary. Once all adjustments are done the balance Rs. 5000/= would be paid with due arrears.

The above is a proposal that has a direct impact on the national budget. It is true. Still the salary increment would positively change the demand function of the economy and also the debt obligations of the workforce. Both help to increase business and economic activity. Then one might think if wage increases are positive why the government did not do it before and do it every year.

Maithripala Matale 19 12 2014One reason is that some economists prefer to bring down inflation and build more foreign reserves than necessary. The other reason is that general salary increment change many variables of the economy hence any salary increment must be able to mitigate the bad effects. Wage increases might increase the inflation a little bit and put a little more pressure on the demand for U.S. dollars and other reserve currencies. But it is also true that the inflation component related to the salary increment is relatively lesser than some economists think. For an example if the salary increment of the total work force is 20%, the inflation that it could cause would be 3%-5% or so.

Therefore, as at now, the economy could easily mitigate a moderate inflation that is caused by wage increase. But with any inflation poor people and retirees would be vulnerable. Therefore, there should be proposals to take care of the most vulnerable people. Maithri has proposed to take care of them too. He proposes to increase the “Samurdhi Allowance” by 200% and provide retirees with an interim pension increment of Rs.3500/= per month until the pension anomalies are remedied; hence so far so good.

Yet, under the proposal number 5, it is proposed to increase the rate of interest from 12% to 15% paid to senior citizens for their fixed deposits not exceeding rupees 1 million. The suggested rate is well above the market rate of interest. The market rates are the rates that can prevail in any economy. The suggested rates which I call “the directive or the administrative rate of interests” usually are based on the whims and fancies of the government bureaucrats but not on prudent macroeconomic or financial principles. Hence, it cannot prevail in the long run. However, it is a legacy inherited from the Rajapaksa administration.

However the basic economic issue that intends to address by paying higher rates is the lack of income for non-working senior citizens. Most of them are retired from the private sector with having lump-sum money. But these retirees issue cannot be solved by paying higher rate of interest than the market rates. Instead the best and only viable solution is to arrange a pension and it should not be a pension based on the principle of “save for your retirement” pension. Since I wrote a separate article on pension planning I do not intend to discuss details on pension planning here.

Instead, I insist that the viable solution to address the old-age-poverty of those who worked for years and years during their adulthood is to organize a pension scheme. In his proposals he never missed this point too. In fact he has proposed to devise various pension programs for formal private sector employees and for those who work in the informal sectors of the economy. This is part of his vision. And it is the answer to avoid the future anomaly of having to pay “directive rate of interests” to any depositor/s. This is one of the reasons why I say that he starts with a “provider government” but intends to move forward with a vision.

Now let us get back to the issue of being put pressure on increasing dollar demand due to the increase of salary. The increase of salary would increase the buying power of consumers. In addition the salary increment would increase credit growth for both consumption and for some “investments.” Part of this money would increase imports which are necessary to support increased consumption and investments. You need dollars to import. This is why that an additional pressure on dollar demand takes place when the general buying power of work force is increased.

The increased dollar demand would change the rate of exchange. Or in other words it could devalue the local currency against reserve currencies. Such unintended fluctuations are extremely negative on the economy. But the solution here is to increase the inflow of non-credit-based hard currencies known as U.S. dollars, euros, etc. Maithri has a plan for it. Under the proposal number 37, it is envisaged to win back the GSP+ for the country. That will increase exports to Europe. Increasing export income is one of the important ways to increase the inflow of non-credit-based dollars. Therefore, in this regard too Maithri has a vision. It is a vision for a facilitator government. This is good.

My observation is that Geneva investigations has nothing to with GSP+, instead the current human right record and good governance have some bearing on GSP+. Since Maithri promises to improve human rights and good governance I feel the approval of GSP+ would be relatively quicker.

I am not going to analyze each and every economic proposal. Instead I would say that the economy is a system. The changes that you make in one area would affect many other areas of the economy. For example we saw above that the simple increment of salary itself is an equation (or function) of many variables such as overall demand, inflation, credit growth, exchange rate etc. When I look at the Maithri’s overall proposals for his “Provider government” I see that there is an underlying “vision” of a facilitator too.

But the most important thing in economic management is to ensure the financial stability always. In general, the corruptions at any level would not cause an economy to collapse quickly but financial instability would. Hence, in light of the financial stability, some proposals must be revisited carefully once the new government is sworn in.

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  • 2
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    My Elders have pointed out some really interesting issues facing the Elite when CC Sira’s Manifesto kicks in on the Januaray 9..

    All Commission Agents and Tender Price Manipulators will be in the slammer.

    And my Elders are happy because there are no Dalits in either of those two categories.

    But no mention of the future Commission Agents and or tender Fixers after Sira and UNP, TNA, CBK take over..

    No filling of the Sea, Land or Rivers,

    Again the Elders say Dalits have Buckley’s buying Real Estate in the New Port City.

    But Sand Sira is not only get an Auto immunity but also a handsome shot in the arm for his Business.

    My Elders say even this LKR 10 G is a “toss”” as not many Dalits are public servants…

    Even my Elders can’t believe that CC Sira can appoint the UNP Leader as the PM for even 100 days when our Dalits have rejected him 4 or 5 times over 20 years.

    Unless the 170 odd MPs who control Parliament become UNP members on the 9 Jan.

    And most of these MPs have been elected by the Dalits in the South to keep the LTTE out and provide them a secure ,peaceful and a united country.

    According to Sira’s mates own Arithmetic , the going rate for an MP is between 200 to 500 Mil for cross overs.

    Where is Sira going to get this sort of dough?..

    Plus these MPs will be bidding even more than higher amount, as they have to face the Dalits in 100 days.

  • 0
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    Smells good.

  • 1
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    Hema Senanayake –

    The manifesto published in the language of Sinhala is an interesting document. In the document there are 100 promises which are to be implemented within the first 100 days.

    https://www.colombotelegraph.com/wp-content/uploads/2014/12/Manifesto-Sinhala.pdf

    So, we need a Common Sense Phamplet in Sinhala.

    Can any of those writers be used after referencing the Common Sense Phamplet o Thomas Paine of 1776?

    Common Sense (pamphlet) Needed in Sinhala, Tamil and English.

    Writers. Any takers? Impressed with the Common Sense Candidate, he has a manifesto. Does Medamulana MaRa have a Manifesto? To continue the Family Dynasty?

    http://en.wikipedia.org/wiki/Common_Sense_%28pamphlet%29

  • 2
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    No mention of abidicating the Presidency.
    It appears to contain CBK/Mangala politricks.

  • 1
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    This manifesto is the same “Mahinda Chintana” document presented in a more obscure language or shall be called a disguised Mahinda Chinthana. Some promises are mere baits to attract votes. Sirisena promises 10,000/= rupees salary increase but does not show how he obtains the money to pay this. Giving mobikes free of charge is only a political carrot to attract votes. Promise to give 20,000/= to mothers is just political puff. If Sirisena had a speck of political wisdom he would have at least said he will give a monthly stipend of 10,000/= for 6 months to postnatals. He has promised he would abolish Ethanol and Methanol mafia. Being a Minister of Health, he doesn’t know that Methanol is a deadly poisonous material and it is not used as a beverage. Sirisena indicates that various types of loans will be given to employees. Loans are readily available from banks if you have an employment or at least have a small business unit. Even that is not necessary if you have two guarantors to sign for you. Any person can lease a vehicle if you can pay for the lease. Most dangerous proposal that Sirisena makes is regarding the University education. Without having any academic experience and not having visited at least a canteen in a University he is trying to meddle with the higher education. He says he would allow the students who obtain less than the standard cut-off marks to enter Universities by paying a fee which would be facilitated as a loan. This is a plan to exploit students by giving loans so that they will become long term debtors. Although this looks very innocent and helpful work this will lead to complete privatization of the Universities in few years time. For instance to enter Medical Faculty as a paying student one would have to pay at least 01 million rupees. Only the rich would be benefited by this. This is a plan of relocating the private Universities inside the State University premises. The next step would be building State Universities from peoples’ money for paying students. Another absurd proposal is to allow students to do part-time jobs while reading for degrees. This allows mudalalis to exploit them by paying small allowances. Academic work is a full time process which needs in addition to reading and research work, extra-carricular activities like sports, entertainment, films, drama, music, social events, political societies etc. etc. University is not a type of big school. It is an organization that is established to train and develop a complete human being. Sirisena talks about joint ventures of private and State sector transport services where railways are also included in the plan. This is an indication of an intention to privatize entire transport service. Sirisena has invaded internet by proposing to establish WiFi Hotspots in every town! These are places where one can reach World Wide Web through dongles by using a laptop or an expensive hand-phone. Even U.S. does not have sufficient number of these hotspots. This is another modification of Ranil’s Chewing Gum Theory where he proposed giving chewing gum to peasants instead of allowing them to chew betel. Common candidate is suggesting to use Wood-Power to generate energy (which is a very inefficient method of generating electricity) so that farmers may generate electricity at home and sell it to the State and obtain an additional income too! If the venture is a lucrative one farmers may even abandon agriculture and revert to electriculture! Sirisena intends to formulate new laws to streamline labor relations. Thanks to LSSP there are sufficient labor laws in Sri Lanka. Even United Kingdom does not have such progressive labor laws (our weakness is not the lack of laws but the process of implementing these laws). Sirisena proposes to improve facilities for alternative medicine which includes Ayurveda, Unani, Homeopathy etc. etc. which are obsolete medical systems. This is a way of reducing government expenses and evading the obligation of the State to provide people with the most efficient and advanced medical facilities free of charge. Ultimately Sirisena intends to form a National Government where all political parties are given representation. This National government is nothing but the present government without Mahinda. The present government IS a National Government i.e. it has all the parties in its corpus. If Sirisena succeeds even Gotabhaya,Basil,and Namal would be having comfortable niches in that enterprise.

  • 0
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    This manifesto is the same “Mahinda Chintana” document presented in a more obscure language or shall be called a disguised Mahinda Chinthana. Some promises are mere baits to attract votes. Sirisena promises 10,000/= rupees salary increase but does not show how he obtains the money to pay this. Giving mobikes free of charge is only a political carrot to attract votes. Promise to give 20,000/= to mothers is just political puff. If Sirisena had a speck of political wisdom he would have at least said he will give a monthly stipend of 10,000/= for 6 months to postnatals. He has promised he would abolish Ethanol and Methanol mafia. Being a Minister of Health, he doesn’t know that Methanol is a deadly poisonous material and it is not used as a beverage. Sirisena indicates that various types of loans will be given to employees. Loans are readily available from banks if you have an employment or at least have a small business unit. Even that is not necessary if you have two guarantors to sign for you. Any person can lease a vehicle if you can pay for the lease. Most dangerous proposal that Sirisena makes is regarding the University education. Without having any academic experience and not having visited at least a canteen in a University he is trying to meddle with the higher education. He says he would allow the students who obtain less than the standard cut-off marks to enter Universities by paying a fee which would be facilitated as a loan. This is a plan to exploit students by giving loans so that they will become long term debtors. Although this looks very innocent and helpful work this will lead to complete privatization of the Universities in few years time. For instance to enter Medical Faculty as a paying student one would have to pay at least 01 million rupees. Only the rich would be benefited by this. This is a plan of relocating the private Universities inside the State University premises. The next step would be building State Universities from peoples’ money for paying students. Another absurd proposal is to allow students to do part-time jobs while reading for degrees. This allows mudalalis to exploit them by paying small allowances. Academic work is a full time process which needs in addition to reading and research work, extra-carricular activities like sports, entertainment, films, drama, music, social events, political societies etc. etc. University is not a type of big school. It is an organization that is established to train and develop a complete human being. Sirisena talks about joint ventures of private and State sector transport services where railways are also included in the plan. This is an indication of an intention to privatize entire transport service. Sirisena has invaded internet by proposing to establish WiFi Hotspots in every town! These are places where one can reach World Wide Web through dongles by using a laptop or an expensive hand-phone. Even U.S. does not have sufficient number of these hotspots. This is another modification of Ranil’s Chewing Gum Theory where he proposed giving chewing gum to peasants instead of allowing them to chew betel. Common candidate is suggesting to use Wood-Power to generate energy (which is a very inefficient method of generating electricity) so that farmers may generate electricity at home and sell it to the State and obtain an additional income too! If the venture is a lucrative one farmers may even abandon agriculture and revert to electriculture! Sirisena intends to formulate new laws to streamline labor relations. Thanks to LSSP there are sufficient labor laws in Sri Lanka. Even United Kingdom does not have such progressive labor laws (our weakness is not the lack of laws but the process of implementing these laws). Sirisena proposes to improve facilities for alternative medicine which includes Ayurveda, Unani, Homeopathy etc. etc. which are obsolete medical systems. This is a way of reducing government expenses and evading the obligation of the State to provide people with the most efficient and advanced medical facilities free of charge. Ultimately Sirisena intends to form a National Government where all political parties are given representation. This National government is nothing but the present government without Mahinda. The present government IS a National Government i.e. it has all the parties in its corpus. If Sirisena succeeds even Gotabhaya, Basil, and Namal would be having comfortable niches in that enterprise.

  • 0
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    Great article. I learned a lot. Guess they can encourage “Buy Local,” to discourage the drain on foreign reserves in case of increase of salary of government servants…..or put increased tariffs on increase of foreign goods.

  • 0
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    How about the hidden Laws and the Political Prisoners lanquishing in
    jails under PTA etc.

  • 0
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    Whatever the contents of the Manifesto, MS has kept his word and released it within a reasonable timeframe as he promised. This in itself is an achievement as he may not have even known of his possible candidature a few weeks prior to the declaration of the election. On the other hand MR who was well prepared in advance has still not released his. Not that what he says there will matter much. It will be more of the same garbage!

    Proof of the Pudding is in the eating.

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