By Shyamon Jayasinghe –
“The practice remained a constant reminder of dysfunction in Sri Lankan politics and economics.”
Doom and Gloom
Amidst the doom and gloom vibes that Donald Trump’s economic measures have given countries like Sri Lanka, there emerges some fall outs that bring more than a smile on our faces. Here is one and let us celebrate: the oppressively unfair practice of bequeathing the politico elite with duty free permits for luxury cars will go. This is among the latest series of policy decisions by government in a war to cut down our import bill in order to save the rupee.
This pernicious practice has been on for many decades now. The public has been forced to tighten their belts in the face of a high cost-of -living that is only set to rise and keep rising. During just one term in office, politicos keep getting repeated permits, which they sell at unconscionable prices to vested interests. Even the JVP politicos, who claim monopoly rights to anti-corruption, have been happy to receive these permits and sell them although they say, the money goes to the party fund. I believe the practice, in more prudent format, has been extended to high-level government and State Corporation personnel and to even monks and priests of that order. The whole business smells of social injustice and fouls the atmosphere.
The Luxury Car attraction also constitutes the priceless bait that attract corrupt politicos to parliament. If that wasn’t there, and the avenues for commissions and bribes go amissing, I am sure these corrupt and creepy men and women of the underworld would not think of coming to parliament. We will see more stability in our politics and more honesty. The practice remained a constant reminder of dysfunction in Sri Lankan politics and economics. In these cars, our politicos roam about and show their feathers psychologically imidating the ordinary villager into meek submission and genuflection.
Theoretically, a yahapalanaya government should have been able get rid of this blight; but how could it when it needed the perks as lure for MPs to cross-over, or come over in order to swell the numbers needed to bring in essential legislation?
Initially at least, emerging economies are fall -outs from the aggressive Trump trade policies. Trump’s personal blemishes have attracted media criticism; but the fact is that, true to promise, Donald Trump seems to be making America great again. Surely, he will be re-elected. Trump has extended himself unnecessarily in the wrong direction by opting for a kind of isolationism. On the other hand, he is stopping America from being taken for granted and screwed right and left by other countries. China, for instance, enjoyed much of its economic boom by America’s free trade practices. While that country entered a goodly range of its products to US with no duty, it cannot do that now.China’s currency is one of the the first to fall against the US dollar. This has impacted adversely on emerging economies like Sri Lanka’s. On the other hand, the US dollar is on a big rise. The rise in the price of petrol has also been partly due to the rise in the American dollar.
Two Ways of Living above Means
The upshot of America’s new push is that all those countries which violated the basic principle of living according to means have become vulnerable. The violation is on two fronts. Firstly, by having our import bill in excess of our export earnings. This is as a result of recurrent trade deficits. Non-essential imports like luxury cars for politicos have added considerably to the trade deficit. Ever since independence, Sri Lanka has had only four years of surplus in the trade balance. The resultant adverse impact on the balance of payments brings down rupee value in global trading. Sri Lanka is an import -dependent economy that inevitably caused national debt problems that further compounded the hunger for dollars in order to service debt in dollars. For many years, we foolishly set the exchange rate in our favour. That was like blocking one’s anus during dysentery!
Fiscal Deficits, Typically Lead to the Fall of the Rupee.
The second type of violation of the rule of living within means comes when we have recurrent fiscal deficits, meaning an excess of public expenditure over income. This contributes indirectly, but surely, to a fall in the rupee. When that expenditure is on non-capital and non-dollar earning projects like salaries and recurrent expense then the money needed for good capital projects that can save the dollar or bring in new dollars become less and less. We, then, commonly resort to foreign funding for such projects and this means we have to payback the dollars and payback interest in dollars. The upshot is an attack on the rupee’s value.
Bad Past Practices Leading to Chronic Fiscal Deficits
Several past policies and practices have caused recurrent deficit budgets and have ruined fiscal management and:
For many years our stupid governments gave free rice to each citizen. Mrs Bandranaike went on record saying that she will even get down rice from the moon to give free to the people. When Prime Minister Dudley Senanayake, honest man, wanted to withdraw this outrageous practice, the Marxist socialists organized the great Hartal that resulted in Dudley leaving his seat.
Sri Lanka’s experiments with socialism were also predicated on a violation of the principle of living within means. Well-managed private sector undertakings were taken over overnight and run and ruined by the state bureaucracy. This made the government bigger and bigger and the expenditure burden on the national budget heavier and heavier.
Government should never undertake business ventures as that is sure to turn profitable ventures into unprofitable ones. As a child, I remember the bus services run by the Soyzas. How well they were run! SWRD nationalised that service and proudly heralded the disastrous event, with kavum and kiribath, as a “victory for the people!” Since that, a good number of businesses or trades were nationalised. Even schools were nationalised.
Government’s stupid foray into retailing was reflected when it tried to sell vegetables via a state institution called the Marketing Department. The practical way for state to help marketing of vegetables would have been to create marketing infrastructure or encourage the creation of that infrastructure, which includes the setting up of cold rooms, encouraging refrigerated transport, encourage wholesale markets and so on. What a pathetic show it was when the Marketing Department, renamed euphemistically as the Department for Developing of Marketing, ran retail outlets! I had personal experience of this failed practice when I took over as the Commissioner once.
The sacred theory hyped then was that the ‘middle man, must be eliminated.’ What a myth that was! Anybody who knows the elements of marketing will tell you that the middle man is a necessary value-adding link in a marketing process. What I witnessed during my days in the Department was a system where state bureaucrats acted as middlemen in place of the more efficient and less corrupt official.
It was the same hype about the middleman that led to the formation of the CWE. Only politicos profited.
All these taken-over undertakings became inevitability the hapless recruiting ground for the growing unemployed. Our unemployment was disguised.
Focus on Economics
Now, in the face of global pressures Sri Lanka will have no alternative but to learn to live within means both by reducing our imports and by cutting public expenditure. If the means aren’t enough for a desired lifestyle, then one must expand the means by investment and business in order to get the cashflow. This is simple economics that have failed us and turned us into a banana republic.
The central problem is that our politicos have ignored economics and have found tribal and identity issues as of foremost importance. Economics is central to our sustenance whether as Sinhalese, as Tamils, or as Muslims etc. It is our media’s responsibility to implant economics-consciousness in the minds of our people.
buwa / September 30, 2018
what a joke. all the Minister permits were issued over 6 months ago. only people with permits now are underpaid civil servants. they are the only people getting screwed over atm.
the rest of the article is the usual cretinous bullshit. the reason all this money is being pulled out now is because how pathetically this govt has failed to secure investor confidence. when interest rates go up in USA global fund managers will covert part of their investments around the world to US bonds. when they do this they will sell the investment in the weakest economies, with highest risk and lowest expected returns.
thanks to our yahapala economic magicians SL is one of those. funny thing is after the intial drop indian currency recovered we couldnt. so expect further depreciation. also the brent just crossed 85. expect petrol to cross 160 soon
Don Stanley / September 30, 2018
Mangy is closing the stable door after the horse has bolted- roads are clogged with massive SUVs of corrupt politicians and their cronies for which massive DEBT was generated – which poor people have to pay with increased cost of living as rupee crashes.
Out of box thinking is needed to stop crash of Lankan rupee. 3 things can be done immediately and through the next Budget
1. Cut back on excessive military and defense expenditure which is the biggest item in the Lankan budget. Sri Lanka does not have a war today and does not need such high defense budget, but US and Trump is militarizing Lanka and Indian Ocean in Cold War with China and Fake Disaster and Terrorism threats which should be resisted
2.. LK Rupee is crashing because of rising oil prices because of US sanctions on Iran. Sri Lanka needs to follow EU and tell US to go to hell and keep buying cheaper oil from Iran.
3. Also Lanka needs to go for Renminibi and Yuan Bonds and not depend on USD.
Sira must impeach Bondscam Ranil for looting Central Bank. He and Hair dresser Mangala, and Marapona are owned by Washington’s IMF, WB, MCC Economic Hit Men and Fake experts, and dancing to their tunes. This must be stopped by civil society activism, JVP and Sira.
Kapila / September 30, 2018
Mr SJ, you seem to be in the grip of outdated ‘Market Fundamentalism’ sold by IMF and WB to benefit Global 1 percent and beggar the rest.
Sad fact is that Bondscam Ranil’s and hair dresser Mangala’s neoliberal IMF-MCC economic policy is designed to put America 1st and benefit Global 1 percent and pile on local Debt on Lankans.
This all but dead model (expect in countries like Lanka that are run by the intellectually backrupt), and the massive economic inequality it brings has given rise to the current swell in populism, racism and religious fundamentalism too.
If liberalism is to survive it must be decoupled from Market fundamentalism as Robert Sidelski has argued in “Good politics, bad Economics” .
Root cause of current crisis is Neoliberal economic development model of unfettered deregulation, financialization of every sector, and liberalization without sequencing and developing value adding in export sectors, or protecting vital local production is what turns countries into Development Disasters. Unfettered deregulation and market reform brings asset stripping and looting of the Wealth of Nations by corrupt local and foreign players. (EU and US have massive subsidies for agriculture sectors.)
Greece, Argentina and Haiti are neoliberalism’s development disasters and where Lanka is. Haiti an island played by US Fake Aid and Fake experts is where Lanka is at headed at this time.
The undermining of research institutions and education system by fake aid experts who peddle outdated growth models is a huge problem. LKI, IPS have been captured by obsolete neoliberal economics and the Neo con Advocata Insitute funded by MCC are examples of the undermining of national institution by Fake aid and experts.
old codger / September 30, 2018
Your remarks on the Marketing dept rang a few very old bells. I spent time there myself in Commissioner Vamadeva’s reign. As you say, it was a den of inefficiency, run on misguided principles. It lost money routinely . The brand name survives as MD, but is privately owned.
Kumaran / September 30, 2018
If you break ranks against the U.S imposed sanctions, the U.S will, in the final scene ban ALL Sri Lankan imports, exports and not allow Sri Lankan passports into the States. There are a whole heap of problems IF these sanctions are broken by any nation.
Agree with reducing the defense budget but militarization (of Hambantota) is already in place.
Iranian oil is not the ONLY source. If you look around you can find crude at reasonable prices.
hancho pancha / September 30, 2018
You cannot blame the politicos. You have to blame the dumb voter. If there is a blacklist of the politicos who traded their duty free car permits the voter must make sure, for sure, those names that appear in the list will not get his or her vote. CT let us have the blacklist out and published. Empty sermons are just damp squibs.
Steve / September 30, 2018
“the oppressively unfair practice of bequeathing the politico elite with duty free permits for luxury cars will go.” What a joke. How much difference will this make to the Import bill.
Words / September 30, 2018
You may continue to write your articles trying to make Ranil look good from across the oceans but let me tell you this very very clearly. Ranil has no chance in hell to win another election and he knows it too. He is no visionary like you’d like us to believe.. he is an incompetent clueless excuse of a man..or maybe woman! For the majority of us..each day in Sri Lanka is a now a day of suffering as we try to run our businesses profitably and make ends meet. And no..it’s NOT Trumps fault..it’s Ranils fault and the country knows it!
Please take him to wherever you are! You’d be our hero forever!!
k.soysa / September 30, 2018
I have been saying this from decades ago: STOP ISSUING DUTY FREE PERMITS TO ALL. Not even to te President, P.M., armed forces, police, GMOA etc. ALL must pay a reasonable duty on all imports. But keep the moratorium in place till we see a significant improvement in the BOP and the Rupee stabilizes. Allow car imports only as an older car is scrapped.
Stop all foreign junkets for GOSL, Ministers, Dty. Ministers, State employees, etc.
Stop over-time in all State owned corporations and departments. No OT whatsoever. There will be howls of protest BUT we brought this on ourselves.
Finally, if we really want to see a radical improvement, DEMONETIZE. Remember the Late Dr. N.M.P in 1970/1??
wannihami / September 30, 2018
K soysa, Oh the good old times of Mrs B and NM’s reign! Let us reintroduce that kind of austerity for 5 years shall we? If not for the country, at least to give a chance for the swollen bellies to deflate, for the houses and closets filled with imported crap to de-clutter, for the roads again to be open up to bicycles, wouldn’t that be fun? Yes do demonetize please, I still remember the dumb jokes we played on our grandma and her much guarded “punchi pettagama” at her bedside during NM’s demonetization.
old codger / October 1, 2018
Amen and Amen again! Just for 5 years.
Piyasoma / October 1, 2018
Good thinking. CWE should go as did the Marketing Dept. Buses should be privatized once again so that we have a decent service on the road in decent vehicles run professionally like in those days.
Duty free Car imports that were an untouchable subject has at last suffered.
Hela / October 1, 2018
Hey Shyamon, why panic? we have your wonderful tikiri mole….Ranil W to rescue us no? We are still waiting for his bracelets and the VW………..(I was very surprised to see Rajapakse’s name was missing in the article….).
Prem Vaidyaratne, Dehiwela / October 1, 2018
The writer called ‘Words,’ says Ranil has no chance of winning. Then why is he bothered in attacking him. Only a fool attacks a fly
chiv / October 1, 2018
Shyamon, as usual spot on. I guess desperate situation calls for desperate action. It is difficult to digest facts for people who are in denial , into partisan politics and find fault with others (IMF, World bank, EU and the West) for all our screw ups. But the plain truth is since independence the finances has been mismanaged year after year by all the politicians and ruling parties.In the name of socialism our governments started getting loans to give free bees to public to get their votes.There is no plans to repay or any long term vision /mission. In the mean time racial discrimination was the sole and hidden agenda of governments to survive the political war and keep power. The rest is SHAM staged by Lankan governments to make world believe. Now that we are bankrupt the drama is coming to an end. But the retarded public still prefers to be in blissful denial.
chiv / October 1, 2018
In India ministers may get government vehicles that too ambassador until few years ago, In Pakistan not only cars but cattle too is put in auction by government. To my knowledge not in any other Asian country where politicians and doctors ????are provided with Luxury vehicles for not doing any thing or worse loot the coffers. Lanka has always been a Miracle country with miracle public.People have the audacity to blame IMF, world bank and the West for their own screw ups. Did they ask any before building those white elephants or hedge against oil price. Every bank will take necessary steps to protect their loans and demand austerity measures as collateral. May be Lankan banks are exceptional and so is the reason to cook up the account books
Hela / October 2, 2018
What is there to celebrate?
"Nettle Grub" / October 2, 2018
What grand posturing – “MP’s denied Duty Free Car Permits”! The stable is locked, where are the horses? Nearly all of the 225 have treated themselves. More than half of them have either hawked their permits or the imported cars. Among them “Honourable ” Ministers, Speaker and The Clergy ! In an incidental disclosure, a re-elected MP is issued a permit at each election. What of an MP who has been in Parliament for 25, 30 or 40 years ? Not a bad killing at several millions each time. What about a person who it is said, falsely declare himself an MP which he was not.