Peace for the World

Peace for the World
First democratic leader of Justice the Godfather of the Sri Lankan Tamil Struggle: Honourable Samuel James Veluppillai Chelvanayakam

Tuesday, May 22, 2018


The Navy and the Puttalam District Disaster Management Unit helping evacuate inmates of the Madampe Pothuwila elders home who were stranded due to the floods yesterday.  (Picture by Prasad Poornamal, Puttalam District group correspondent)
The Navy and the Puttalam District Disaster Management Unit helping evacuate inmates of the Madampe Pothuwila elders home who were stranded due to the floods yesterday. (Picture by Prasad Poornamal, Puttalam District group correspondent)

The Disaster Management Centre said a total of 68,000 persons belonging to 18,079 families have been affected across 19 districts due to the adverse weather prevailing in the country.
Disaster Management Centre (DMC) Deputy Director and Media Spokesman Pradeep Kodippili said more than 6,710 people have been displaced and currently staying in 168 safer locations in nine districts.
Eight deaths have been reported so far and six out of those deaths were due to lightning incidents. The highest number of affected people has been reported from the Ratnapura District where a total of 13,033 people belonging to 3,287 families have been affected.
He said that the red notices issued for some areas regarding the possible disaster situation including landslides and floods are still valid and people should be vigilant about possible risks.
The Deputy Director requested residents in low-lying areas close to the Kelaniya, Nilwala, Gin and Kalu rivers to be vigilant and evacuate the area if necessary as the water levels in the rivers are still rising.
According to the Irrigation Department, water levels of Millakanda in Kalu Ganga, Baddegama in Gin Ganga, Dunamale in Attanagalu Oya and Panadugama in Nilwala river were rising.
Meteorology Department sources said the prevailing showery condition is expected to enhance in the north-western, western and southern sea areas during the next few days.
Showers or thundershowers will occur at times in the sea areas extending from Trincomalee to Pottuvil via Batticaloa and in the sea areas off the coast extending from Mannar to Hambantota via Colombo and Galle. Heavy showers can be expected at some places in the above shore areas.
Showers or thundershowers will occur at several places in the other sea areas.
The coastal belt extending from Kankesanturai to Potuvil via Puttalam, Colombo and Hambantota can be rough at times as the wind speed can increase up to 60 kmph at times.
Strong gusty winds and rough seas can be expected along with thundershowers. Naval and fishing communities are also requested to be vigilant.

JO request for debate on floods turned down

By Saman Indrajith- 

Speaker Karu Jayasuriya, yesterday, turned down a request made by the Opposition for a debate on prevailing disaster situation in the country and fuel price hikes instead of the scheduled one an Order to provide for a condominium in Kollupitiya

Speaker Jayasuriya said that it had been decided at the last party leaders’ meeting to debate the Order under the Strategic Development Project Act No 2 made by Minister of Development Strategies and International Trade. "Once such a decision is reached we have to stick to it. That is the tradition. I cannot grant the request by the Opposition to debate the prevailing situation in the country now."

MEP Leader Dinesh Gunawardena: "There is a crisis situation in the country owing to inclement weather. Floods and landslides have affected people all around the country. Tens of thousands of people are in distress. Damages to houses and properties are massive. This is a situation of national emergency. We should take up this issue instead of what has been listed for debate. On the other hand, fuel price hikes have made life miserable for people. Prices of all essential items are soaring due to the fuel price increases.

Leader of the House Minister Lakshman Kiriella: The fuel prices are still lower than those in 2015.

We should take up the business listed for the date.

Speaker Jayasuriya: At the party leaders’ meeting it was decided to grant time for JVP sponsored adjournment debate on fuel price hikes this evening. Two hours have been promised. We could take up that issue then. If you need, we can allocate more time. It was also agreed to take up the emergency weather situation issue during the environment debate on Wednesday. You come here and talk something else. Please, let me proceed with the day’s business. MP Gunawardena asked for time to make a brief statement. I gave that opportunity. Now, you make demands against the previous agreement.

Leader of the House: MP Gunawardena sought permission only for a statement.

MP Dr Bandula Gunawardena: As per Standing Orders, a decision made at the party leaders meeting is less important than a request made by more than 21 MPs if they make that request standing up together. There are more than that number here. So the Speaker could revise his decision. If he has doubts he could check it. The MPs are ready to support the change of topic of the debate.

Speaker: We cannot do that. We will abide by the decision made at the party leaders’ meeting.

MP Udaya Gammanpila: Parliament is conducted in accordance with the Standing Orders. Standing Orders have provisions for a request made by more than 20 MPs.

Leader of the House: Have more than 20 MPs made such a request? As per Standing Orders such a request should be made in writing.

Speaker: They made such a request. Hours were spent at the party leaders meeting on the matter. I turned down that request. There is no point in discussing the matter further.

MP Dayasiri Jayasekera: We pass the matter scheduled for today without debate and then take up the disaster situation for debate.

Speaker: Majority at the party leaders meeting agreed to take up the matter on Wednesday.

MP Vasueva Nanayakkara: According to traditions of Parliament, matters of national importance should be given priority. We need a debate on floods and fuel price hike. When you sit in the chair of the Speaker, look the issue from the people’s point of view and not from the party’s.

Jayasuriya: I do not take the government side. What I said was the agreement that had been reached at the party leaders meeting.

Leader of the House: The Speaker has given his ruling. There is no further debating this matter. We should move forward with the day’s business.

MP Dinesh Gunawardena: Why are you afraid of discussing the people’s problem?

Prime Minister Ranil Wickremesinghe: When a ruling is given by the Speaker we have to abide by it. If we debate and doubt it that would be against the Speaker’s ruling. If a ruling of the Speaker cannot be accepted then we would have to appoint a committee to look into that.

Mahindananada Aluthgamage: What is more important foreign investment or the problems of people?

MP Bimal Ratnayake: We have made a request for an adjournment debate on fuel price hikes. It has been granted. We could take up the disaster situation, too, at the same time. We may debate both issues together. The government can get their ministers to respond to both issues.

Leader of the House: We are agreed. You can take up any time after 4.00 pm.

Annuity-based PPP can expedite infrastructure developments

logoTuesday, 22 May 2018

Sri Lanka has primarily relied on public finance for the development of public goods and infrastructure. While running a big government which directly employs nearly 18% of the labour force, financing public infrastructure by the Government is a real challenge. As a result, Sri Lanka is highly indebted compared to its peer group (even among rating category – B). Needless to mention, that as a result of such financial constraints, our infrastructure and their contribution to economic development and growth remains subpar.

Our urbanisation rate according to official estimates is around 18.6%. This means that nearly 80% of population lives outside of main cities. To spur the economic growth, there is a greater need for connectivity via roads and railroads for transportation of passengers and goods in between cities and villages.

Public-Private Partnerships

Infrastructure development requires large upfront investment with a long gestation period for the recovery. Furthermore, pricing of usage of such infrastructure is a sensitive subject and it affects an investors’ returns on capital invested. Therefore, direct investment in infrastructure by profit motivated private investors are limited. However, due to limitations in the public finance, the governments around the world have invited private capital into infrastructure through various Public-Private Partnership (PPP) modalities. PPP models have evolved over the years to address surrounding issues and controlling the cost of such investments.

Primary risk of PPP is the uncertainty on the return on investments. Developers will have to face demand risk among many other risk variants. Apart from the sensitivity of demand to the pricing of such infrastructure, investors are exposed to political risk due to the essential nature of infrastructure facilities. The lenders cannot repossess assets in the case of distress, hence the lenders may demand tighter lending covenants and guarantees by the governments. As a result, the moderns PPP options structure in such a way that the originator, in most cases the government or government-linked entity assumes the demand and pricing risk. In this way, return expectation of investors rank in between equity and debt. Annuity-based PPP is one such structure, adopted worldwide.

Indian PPP model

for highways

India has adopted a hybrid annuity structure for construction of their roads and highways. The main feature of the hybrid annuity structure that the Government assumes the demand and pricing risk while the investor contributes to the majority of project financing and operation.
  • Selection parameter: Project Life Cycle Cost defined as Net Present Value (NPV) of the quoted bid project cost plus NPV of the operations and maintenance (O&M) cost for the entire operations period is the bid parameter. The bid is awarded to the developer quoting lowest NPV for project life cycle cost.
  • Cash construction support: Highway Authority, India (the granting authority) pays40% of the bid project cost to the concessionaire in five equal instalments linked to physical progress of the project. Concessionaire shall have to initially finance the balance 60% of the project cost through a combination of debt and equity. Developers may establish Special Purpose Investment Vehicle for this purpose.
  • Annuity payments: The concessionaire will receive semi-annual annuity payments from the granting authority (Highway Authority, India) on completion of the project for the balance 60% of the final bid project cost. The annuity payments have been aligned with typical revenue profile for highway projects. Interest costsare built into the annuity on reducingbalance basis of final construction cost. This is typically calculated at a premium to bank interest rate (Returns stay between debt and equity).
  • Operations and Maintenance (O&M) cost: The Authority will pay the agreed O&M payments to the concessionaire along with annuity. Concessionaire shall remain responsible for the maintenance of the project till the end of the concession period, which is typically 15 years.
  • Toll revenue: Toll collection shall be the responsibility and revenue of the Highway Authority, by this, investors will not be exposed to demand and pricing risk.
Indian model significantly reduces the burden of the Government while securing the project upfront. Annuity-based PPP contracts are not considered as a debt. The annuity model ranks in between debt and equity in the risk profile. This allows the government to allocate limited resources more effectively and channel budgetary allocation to needy sectors such as education and healthcare

Annuity model

The variants of annuity model could be utilised in other sectors such as development of public transport, buildings, water and sanitation facilities where it requires a large upfront investment for the construction. This is quite similar to purchasing a vehicle on operating lease, it allows the user to use the facility from the beginning without the upfront investment. The ownership of the assets in this case is not a concern as long as the assets is available for satisfying the utility of the final consumers. The annuity model significantly reduces the uncertainty and reduces the cost of financing such projects. It allows the government with budgetary restrictions to build infrastructure without leveraging its books.

PPP framework

Sri Lanka needs a clearly defined PPP framework for attracting investments into the infrastructure sector. The PPP division created within the Ministry of Finance is an important step towards developing such a framework. The existing procurements guidelines created in the late ’90s requires amendments within the prevailing legal framework in order to accommodate different variants of PPP.

The country has unattainable fiscal targets given our large investment requirements in the development of infrastructure. We will be able to provide a cushions to the budget if we can develop a workable PPP framework which allows different PPP modalities. Annuity-based PPP will eliminate most of the risk investors don’t want to assume when they commit large sums in an uncertain environment and it allows the Government to fulfil its promises to the people by providing the key public goods and infrastructure.

(The writer is a CFA charterholder; capital market specialist and Certified FRM. The views and opinions expressed in this article are those of the writer and do not necessarily reflect the official policy or position of any institution.)

What Are We Borrowing For?

Dr Ranil Senanayake
logoIn the current tussle for political credibility, borrowing money for ‘development’ is equated with success. All politicians laud ‘development’ without any idea of what it means. The question ‘what is development’ was asked as early as February 1978, but our ‘leaders’, from that time onwards never had a answer and are still stuck in the same old rut of blind consumerism, enriching themselves and their cronies while getting the population deeper and deeper into debt. 
Meaning of Development (1978)
Development and progress are words that we are very familiar with and rightly so. As a nation all our hopes and aspirations are centred around the promises attendant on these processes. Yet recently there have been some questions on the values of ‘development’, and as in every controversial issue, the battle lines have been drawn. the combatants are, as is usual in these affairs, mostly from developed countries. the people of developing countries, more often than not, are mere witnesses to these esoteric exchanges. I do not intend to imply that these arguments are not valid; rather I would like to draw attention to the fact that often both points of view have their references deeply rooted in ‘developed’ or Western technological thought. 
Development in the context of the current usage of the word certainly seems wedded firmly to Western technological thought. Whether we use it to describe an economic order or a social order, the roots are the same. e word development carries other connotations 
in the context of present usage. It suggests that the country to be ‘developed’ is some way inferior to the model to which it aspires to become. the point here is: inferior by whose standards? To an industrialist from a Western country, a poor village in the third World does indeed need to be developed. A view, that will more often than not, be held by the rulers of the same country. To quote Richard Gott (CDN 1978). 
“With the formal ending of colonial rule in all three continents of the third World, political independence was granted a tiny elite trained not to question the framework within which the world economy operated.” 
It is this elite that laid the foundation for education of people in those countries, thus the value system operating and transmitted was certainly not endemic. With this perspective in mind, lets us attempt to look at ourselves. 
We in Sri Lanka are continually talking about development. I believe that in the end this merely means an increase in industry and consumerism. It most certainly could not refer to a cultural or a philosophical development. 
A country in which a major part of her population comprehends philosophical concepts that are addressable only by a minority of scholars in the West must certainly be, in comparative terms, more developed. An argument could be made that we also do not need to be more developed in our agriculture. Does an agricultural system that does not rely on any form of energy subsidy, other than biological energy, need to be ‘developed’ so its productivity becomes reliant on subsidized energy? 
In the so-called developed world active research is under way for systems which are not subsidised by fossil fuel. We have it – and yet want to disrupt it in favour of energy intensive agricultural practices. Could this trend be attributed to the fact that most of our scholars are trained to look at problems in a purely Western technological perspective? Of course, all of us want to utilize our training for national good, but we should be careful and try to objectively evaluate the long-range repercussions of increased energy dependence.  
Hartford Tomas (CDN 1978), who is a proponent of third World development, comments on the help given by developed countries to the ‘to be developed countries’: 
“The philosophy of development from the grassroots comes up from the professionals, in Robert McNamara’s annual speeches and in the work of Schumacher’s intermediate development group.” 
Well now, with all due respect for this illustrious gentlemen, I submit that the grassroots existed long before Robert McNamara’s discovery of them, and that if one reads Schumacher’s Small is Beautiful, one gets the distinct impression that Dr. Schumacher took many beautiful things from so called ‘underdeveloped’ countries. I do not mean to belittle the great words of these scholars, but wish to point out that they are addressing the developed world. So then, what help do we need from the professionals? To tell us what we already know about ourselves in ‘developed jargon’? 
So we are still confronted with the dubiousness of the meaning of development. It would seem bizarre indeed if it transpired that we have been developing for the past 30 odd years mainly in a Western technological perspective. Some indication of our development can be addressed if we look at these questions in terms of the goals identified by those who describe the path. One of the standard answers to the development question is: the goal is economic growth. On this point Prof. Dudley Seers says, “in fact, it looks as if economic growth may not merely fail to solve social and political difficulties, certain types of growth can actually cause them”. 
An important question is: who accepts responsibility for the results of this monomania for economic growth? Are we, by changing the value system, creating an artificial need for goods and services non- essential to our well-being as measured by any endemic standards? It may be useful to reflect again on a statement by Prof. Seers: ‘the social barriers and inhibitions of an unequal society distort the personalities of those with high incomes no less than those who are poor. Trivial differences of accent, language, dress, customs etc. acquire an absurd importance and contempt is engendered for those who lack social graces, specially country dwellers’. 
Now let us take a case-in-point. Last week in the suburbs of Colombo, five youths were picked up for theft by the police. they each had on them at least Rs. 1000 worth of apparel (imported shirts, imported trousers, imported wristwatches, imported socks). their occupation? they were unemployed. How did they earn the money with which to buy the goods? they stole produce and other sellable items from the village. What was their need? they had to maintain their status (tathwaya). Is this development? How did these values come about? A.M. Hocart, who was the head of the Ceylon archaeological survey, wrote some poignant words that bear relevance to these phenomena. 

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How did a Multi billion dollar project find its way into the dustbin ? Exposure by Upul Jayasuriya chairman of Investment Board who resigned !

LEN logo(Lanka-e-News – 22.May.2018, 10.50AM) Believe it or not ! Reports of a  huge multi billion US dollar  project for the country’s benefit had been thrown into the dustbin by some two penny half penny junior lawyers of the Attorney General’s department after being signed by them . Lawyer Upul Jayasuriya P.C. who resigned from the Investment Board which is the nerve center inviting  foreign investment  has via the letter (that is appended ) following  his  most valuable appraisal of the situation  exposing the sorrowful state of affairs in the country which led to a US dollar  2000 million capital fund that was received  going down the drain , has questioned what measures are going to be taken to remedy this colossal blunder ?
The text of his letter is hereunder. ….

Whither FDI in to Sri Lanka?

GCEC law No 4 of 1978 was enacted on the 7th March 1978 by Prime Minister JR Jayawardena as he was then after assuming duties after the election that was held on the 22nd of July 1977. He did not waste time. He visualized it got the same drafted and implemented country's first ever free trade zone. He promised a righteous society and an open economy.
He didn’t spell out much of the details of the open economy that he was planning for Sri Lanka. By far he had the best cabinet of Ministers ever established since independence. He didn’t waste any time in giving birth to the Greater Colombo Economic Commission which was the brain child of JRJ.
He was ably assisted by Upali Wijewardena who has had much experience and exposure with the business conglomerate he has already established mainly in Singapore, Thailand and Malaysia apart from Sri Lanka in the conceptualization of the GCEC (present BOI). He had everything at his fingertips. That was the beginning of the BOI which was the 2nd such facility after Singapore in the entirety of the Asian region and the trend setter for countries like India, China, Malaysia, Vietnam, Cambodia who were all trailing behind Sri Lanka.
JR Jayawardena's obvious choice was Upali Wijewardena to be the first Chairman of the newly established Greater Colombo Economic Commission. He didn’t budge from his decision though the Parliamentary Select Committee screening high posts, chaired by Premadasa didn’t approve his appointment on a petition submitted by MP Sarath Muththetuwegama.
There were two able deputy director generals one in charge of administration, Paul Perera and Dr. Sivali Ratwatte. Non of them had worked in similar setup before. They were good listeners and amiable commanders who managed to create the country’s first ever free trades zones in keeping with the requirements of the investors.
JRJ made it known publicly, "let the robber barons come! We are open !"
There wasn't much of project evaluation as the choice was left for the investors within the legal framework. Many neighboring countries were envious of the potential of Sri Lanka. However they didn't rest. They copied Sri Lanka and were galloping behind.

What did Sri Lanka offer?

The GCEC Law was incorporated with an area of authority ranging from CHILLAW to Wattala extending towards Gampaha. First BOI Zone was established in Katunayake. The opposition and ‘patriots’ were not in favour of it. They didn’t go on rampage as they did in Hambantota in the recent past. Within the zone there was no local government laws that were applicable. There was provisions in the BOI law that labour laws weren’t to be applicable. However such provision were never enforced.
That’s not all. By virtue of the GCEC (BOI) Law the Exchange Control Law, the Customs Law, and the inland Revenue Law were all to be regulated by the BOI. This was truly a one stop shop. Department of immigration and migration were given strict instructions to follow the advise of the BOI. These laws were contained in the schedule B of the GCEC (BOI) Law. Therefore The powers of the Customs Department, the inward and outward remittance of exchange by the department of exchange control were facilitated by the BOI. Tax holiday once granted, was regulated by the BOI. Granting of visa for the foriegn investors was upon the recommendation of the BOI. These powers as per the BOI law were extensive. However after 40 years of existence it is necessary to have a fresh look and evaluate the working of the same and improve the statutory provisions in keeping with the current global trends. It is particularly important due to corruption getting deep rooted. The writer has had the privilege of being associated with the draft of the law and the implementation of the same in its formative year.

President Premadasa era

Expansion of the BOI free trade zones were hampered due to the on going war as village youth were reluctant to come to Colombo. Accommodation cost became high. Though there were 7-8 zones that were created by the then President Premadasa, he identified the problem of the dearth of labour force and their accommodation. He changed the structure of the BOI and changed the BOI law enabling the BOI to enter in to section 17 Agreements and to be located anywhere in the country with the full blessings of the BOI. Thus was the birth of the 200 garment factory program enabling the employment of the rural youth. Coupled with his world acclaimed housing program he changed the demographics of development by taking it to the village. Within days of an application all the relevant departments called the investor and volunteered to assist the setting up of the enterprise. No official failed as they new that the repercussions would be serious.

Pre 2015 era

After 1994 onwards whilst Sri Lanka was on the decline of the scales of economics;  India, China, Malaysia, Vietnam and Thailand have begun their journey for the development of the economic zones with necessary changes in their legal structure making it conducive for the inflow of Investments. Many countries made Sri Lanka  the example, Whilst Sri Lanka was held back with the communal strife our regional peers were galloping.
After the end of the Premadasa era it was heart warming that the successive governments shredding the criticism they articulated whilst in the opposition, embraced the open economy policies. President Kumaratunga, President Rajapaksha and their respective regimes accepted the same policies of open economy with with open arms adopting different approaches.
It was during the Stuartship of Dhammika Perera BOI approval was granted within a day. This attitude was very much encouraging to the investor. His point of view was that the project viability was a matter for the investor. BOI became truly a facilitating agency instead of a regulating agency. Whether the investment was black or white was a matter for the other agencies such as the Banks or its regulating agency the Central Bank through the financial investigation unit.
During 2010-2015 approval process of the BOI was difficult. There were many obstacle that were placed locally and globally for reasons best known to the respective regimes. Locally the political masters took upon themselves the responsibility of the approval process. It was a lucrative process. The powers of the BOI were usurped by the Treasury and the granting of BOI facilities, tax holidays, availability of land , sale of land were all decisions for the political leadership.
New law of strategic development was promulgated. Approval process was sought to be vested by law in the hands of the cabinet of Ministers. By virtue of section 3 and 4 of the strategic development law the facilities as defined by the cabinet of Ministers were regulated and tabled before the Parliament. There was no cogent reason as to why the same decision granting facilities to the enterprise had to be tabled before the cabinet on two occasions except it sent shock waves to the investing communities for the unequal treatment and the subjective standards that were applied by the BOI and other line agencies at the behest of the political leadership vesting upon them a lucrative discretion.
Criteria that was adopted in giving strategic development status was subjective. Existing industries, apartment complexes and in some instances hotels were brought under this category. Shangrila Hotels, sale of the steel corporation, Check port city, Cinnamon Water Front are a few examples creating unequal among the equals.
There were other obstacles that were placed on the FDI in follow with the European Union ban that was imposed on the export of fish and the GSP+ being taken away Garment industry was crippled. Foriegn ownership of land was further curtailed.
Rule of law was in shambles. Democracy was in jeopardy. Judiciary was in tatters. Process of Investment approval was unequal to say the least. Decisions lacked transparency. Interest rates soared. In no uncertain manner investment climate was unwieldy. Capital funds were not available. Large number of local investors moved out of the country exploring greener pastures.

Post 2015

With the dawn of 2015 the investor interest was rekindled. Many changes that were desired were in fact brought in. Independence of the Judiciary was established by the promulgation of the 18th amendment with the re-establishment of the constitutional council. Era of Enforced disappearances ended. butchering of media personnel diminished. New found freedom was enjoyed by many even to the extent of overstepping the mark.
There was no executive interference on the appointment process of the judges of the superior courts. Rule of Law has been re-established to a great extent. Professional independence has been reinvented. Media freedom is in abundance. Right to information has been legislated. President’s election has been curtailed to two terms. Ministers and a high officials have been taken to task. However it is still the beginning of a long journey. With some of it the bureaucracy has been placed in an uneasy environment with the high flung politicians of all parties getting exposed and thrown behind bars.
Executive powers of the Presidency were not enforced. Climate of less governance was brought in. In some quarters questions were posed as to whether we have done too much too soon and in some instances too little in maintaining discipline.
Criticism of the government is directed from within. Ministers of the current cabinet are openly critical of their own colleagues. Many Ministers are galloping with Presidential hopes. Whether such criticism is expected or by design is not known.
First Executive President JRJ who was responsible for the open economy and the strategic development of the country with the gigantic Mahaweli Development didn’t tolerate such criticism when it came from his own dear friend MDH Jayawardena. President Jayawardena wrote an emotional letter to MDH reminiscing his old ties, asked for his resignation as MDH Jayawardena had violated the collective responsibility of the cabinet. He compiled and tendered his resignation. However MDH didn't crossover.

Investment facilitation

A new draft law was brought in proposing to take the powers away from the BOI. Powers of the BOI to enter in to Section 16 and section 17 agreements were to be taken away. Though the draft bill is yet to be enacted there has been considerable confusion on the investments policy and incentives and its facilitation if the wheel had to be re-invented leaving the BOI aside.
Though the tax holiday that was extended to section 17 BOI projects ended on 31 ST March 2015 the BOI decided on its own to apply the 2006 regulation that was gathering dust issued by the Minister in charge of BOI under section 24 of the BOI Law.
This too ended by 27th of April 2016. There were no more tax holidays to be extended. There were no more agreement to be signed by the BOI under section 17 of the BOI Law extending tax holiday. Number of applications that were received by the BOI dwindled.
With the re-establishment of the independent decision making process of the administrative structure in the country, BOI has become one of the casualties. Coherence in the decision making process of high officials of different departments and statutory bodies has diminished.

Way forward

Policy planning and the implementation have been abdicated by the Ministry vested with such power. Each Ministry has begun policy making and implementation of policy. One stop shop that was expected to be designed and implemented by the BOI is diverted to multiple one stop shops under different Ministries. If Different Ministries promote investments there would be total confusion. Investors would be at a loss for direction.
Be it availability of land, electricity, environmental issues, issues concerning forestry, local government issues, customs issues are multi faceted. It is imperative that this decision making process has to be centralized and handled with an iron fist. Such powers should be brought within the BOI Law with deemed approval.
Whilst appreciating the enthusiasm and the positive approach of the single window Committee and the Cabinet Committee on Economic Management, yet it has to be noted sadly that even such decisions are not fully implemented by the respective departments and the officials. Hierarchical red tape has peaked. That was the end of the road for US 2 Billion Sri Lankan led American investment of an oil refinery.
The manner in which some of the decisions are taken by the officials is much to be desired. Sometimes it is arrogance, sometimes it is ignorance, sometimes it is the integrity.  A glimpse of the manner in which some official decisions were taken by an institution that was once considered to be the pinnacle of the public service is now in the public domain.
Are we to allow the foreign investors to go through the same chores! Availability and the procurement of land  for investment is a nightmare. Though decisions have been taken at the level of the President and the Prime Minister the snail speed at which the officials are moving cannot be tolerated and is unimaginable. The manner in which investors are shown the door by several line agencies are appalling. The BOI cannot face the music on its own. Identification of suitable land for proposed zones has been achieved by the BOI. However the acquisition process takes too long. Battle doesn't end there. Provision of infrastructure facilities such as land clearance, roads, water, electricity need support from many a government agency.
Availability of funds is another issue. All steps have to be taken concurrently. Country cannot afford steps to be taken consecutively. It is desirable that development of these zones as identified in Horana, Matara, avissawella, Mulativu, Batticoloa and Kurunegala have to be fast tracked particularly with the participation of the private sector local or foreign as Public Private Partnerships.
Proposed oil refinery in Hambantota, the electric railway manufacturing project and several other truly strategic projects have to be identified land. Bureaucratic inefficiency has opened the door for corruption.

Is it only the line agencies?

IE Surbana Singapore the state owned Investment Zone Development agency of Singapore expressed willingness to join up with BOI with a joint venture to plan the development of the corridor up to Trincomalee. I.E. Surbana Singapore has presence in more than 90 countries. They have agreed to make an exception to Sri Lanka and to enter in to a joint venture.
This was the brain child of Prime Minister Ranil Wicremasinghe who initiated this with an MOU signed in the presence of the two Prime Ministers in Singapore. Several days of midnight oil was burnt in the preparation of the JV agreement by the legal eagles. Objective was to use the local professional talent in the planning of the new development within Sri Lanka and overseas. Precincts of the Beira Lake were on the map as a priority. This area consisting of nearly 220 acres government land only could have been declared as a BOI zone under the BOI Law. Even the acquisition or the divestiture of land could be facilitated under the BOI Law and fast tracked.
A few weeks before the signing of the JV agreement the same was sent to the Attorney General's department for consideration as a matter of formality. Some petty state counsel looked at the draft and turned down the approval with a letter signed on behalf of the Attorney General.
Even If there was any legal obstacle there was no counter proposal made by the Attorney General's department as a way out of the situation and the million dollar project ended in the dust bin. That was the unceremonious end of the road for a gigantic project.
It is unfortunate that Hambantota investment zone has run in to troubled waters. This is the results of petty politics played by the 'patriotic' joint opposition. This is the first time ever in the world that political leaders were found leading mobs on the road and came in large numbers burning tires pelting stones on the large group of investors led by the Chinese Ambassdor and created mayhem. The so called bankrupt political leaders won the day and the country and its people lost.

Ease of doing business

Entrepreneurs when deciding where to invest are mostly guided by the world bank index on ease of doing business. It includes to examine as to whether there are delays in starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority interest of investors, paying taxes, trading across borders and enforcing contracts.
During the last two years Sri Lanka has deteriorated in the ranking from 99th to 107th and then to 111th world wide. This can be for two reasons. It can be that other countries have improved their short comings and improved their procedures or it can be that ones own procedures have worsened. Either way Sri Lanka is not in a comfortable situation that one could be proud of.
BOI's contribution in the Improvement of Country's ranking is minimal. It could only be catalytic. However when FDI flow dwindles BOI will be asked to explain.
Large number of agencies have to share the resources with accelerated decision making process have to be adopted to enhance the investment climate and improve the country ratings. If this can't be achieved within a short period of time it will never be done. We have discussed enough. Three years have passed. Either we have stagnated or deteriorated.
It is best that we start with the failures rather than successes. Contribution of Outside agencies to improve the the situation is minimal. Whilst appreciating the contribution of the World bank, IMF and other researchers such as Harvard Business School, such experiences would be based on hearsay observations.

Role of the judiciary

In protecting minority interest of investors and enforcing contracts Sri Lanka is way behind. In the enforcement of contract Sri Lanka is 169th out of 185 countries. Be it insolvency proceedings or in the protection of minority interest Sri Lanka's situation is much to be desired.
There have been no rules promulgated either statutorily or by rule to fast trac cases of the BOI companies. It was only the BOI law that has a special provision where no enjoining order could be issued against a BOI company without one months notice. It is high time that there be some time limits to be introduced with summary procedure by way of amendment to the BOI Law.
Service of summons to a Foriegn company is a nightmare. It has to be translated and summons are to be issued through the Ministry of Justice. This process would take minimum two years. New civil procedure code amendment has over looked these concerns. Issue and service of summons is no better. In a matter of regular procedure it takes more than 8 months for the issue of summons by the courts. In the case of enjoining orders the opposing party would refuse the acceptance of summons and do the damage in an irreparable manner making the enjoining order negatory.
In a recent case in one of the High Courts of India notice and the enjoining order was issued by a whatsApp message adopting modern technology. Why is Sri Lanka lagging behind? In the matter of dispossession though the law requires that the matter be concluded within two months the rule is always in the breach. The Judicial Service Commission and judges of all rank have to be sensitive to these issues. It is imperative that Sri Lanka has to be more vigilant, sensitive and responsive to these issues.

What's in store?

Current regime has few more years to go. It's not too late to address the issues. It is inevitable that many heads have to roll. Several amendments in the law would be essential. Change of many rules would be important. Whilst appreciating the efforts of the world bank and the Howard business school it is imperative that we have an analytical view of the failed projects. It is also important that we look at the projects that do not realize and 10-15 agreements that are terminated by the BOI periodically. It is equally important to facilitate the projects that have begun the investment process.
No investor comes to Sri Lanka with gunny bags of money. International Banks would have to be attracted. Growth funds that are already tapping on the door of the BOI have to be accommodated. There has to be a new regulation that has to be promulgated under section 24 of the BOI Law by the Minister of strategic development enabling such equity funds.
This has been attempted many a times and has been unfortunately turned down by the legal draughtsmen due to lack of knowledge and understanding. At least two of such growth funds that had lined by more than US $1000 Million have been turned away. This country cannot afford to pay such a heavy price jeopardizing our future generations.

Time is running out for Sri Lanka.

Policy makers, Law makers , monitors , officials and other support services have to wake up from its deep slumber and be vigilant. No more time can be wasted as we are on the brink of extinction from the global investment destinations having inherited a debt ridden economy with a brand new international airport with no planes and a brand new international harbor with no ships.

Upul Jayasuriya P.C.

Former BOI Chairman
by     (2018-05-22 05:41:59)


Zahrah Imtiaz-Wednesday, May 23, 2018

Finance and Mass Media Minister Mangala Samaraweera challenged Kurunegala District MP, Mahinda Rajapaksa to a public debate on the country’s current debt and economic situation.
The minister who completed one year since taking over the ministry said he won’t bring up the corruption and other crimes.

“As a former Finance Minister himself, he should be able to debate this with me.
“The economy has come a long way since he was Finance Minister”, Samaraweera said addressing a media briefing at the Ministry yesterday.

Refuting allegations made by Rajapaksa on the country’s debt, the Finance Minister stated in the next 12 years, the majority of loan repayments came from loans taken before 2015.

In 2019, the government will face a Rs 4.2 trillion in debt repayment, 77 percent are loans from the Rajapaksa era. Of this, Rs 970 billion was only taken after 2015 and 48 percent was to repay earlier loan instalments, he explained.

In 2020, the government will have loan repayments to the tune Rs 3.7 trillion (77 percent from the Rajapaksa era) and in 2021, it will have to pay Rs 3.4 trillion in repayments (83 percent from the Rajapaksa era).

The minister noted that his government had also faced a continuous drought and other disruptions to government but they have also scored many an economic victory in the last three years.

The Opposition has been harping about an unbearable cost of living and people have started to believe this lie told so many times. But in reality, the cost of living today is much less compared to that of 2014 (during the Rajapaksa regime), the minister said.

He noted that the price of diesel, petrol and gas was much lower than during the Rajapaksa regime. In the first 100 days of the Yahapalanaya government, the salaries of government servants were increased substantially- to be specific, a 107 percent increase will be seen by 2020 (when compared to 2014).

The Minister went on to further highlight the prices of essentials such as: white rice from Rs 78 in 2014 to Rs 80 in 2018, white nadu from Rs 88 in 2014 to Rs 90 in 2018, flour to be Rs 97 in 2014 to Rs 89 2018, price of potato from Rs 108 to Rs 100 in 2018, Big onion from Rs 90 in 2014 to Rs 85 in 2018, dhal from Rs 170 in 2014 to Rs 145 in 2018, a can of tuna from Rs 230 in 2014 to Rs 228 in 2018. Sprats however increased from Rs 504 in 2014 to Rs 750 per kilo in 2018.

“Some have increased slightly but most when compared to earlier have not increased”.

The minister said over the last three years they have laid a strong foundation for a vibrant economy. Government tax revenue in 2014 stood at 10.3 percent was increased to 12.6 percent in 2017. In 2017, overall government earnings rose to 13.8 percent.

Government expenditure in 2017 was brought to a manageable 19.4 percent and since 1992 for the first time in 2017, the budget primary balance reported a surplus.

“The Government will be able to hereafter cover all recurrent expenditure on its own”.

2017 was also the year with the 4.2 percent unemployment rate, the second lowest rate in history. The government has also increased the Samurdhi expenditure from 3.1 in 2014 to 3.4 at present. “In 2018, we were able to obtain the status of an upper middle income country. With a per capita income of USD 4,065”, said the minister.

“The Poverty Index in 2012 which was at 6.7 percent was also reduced to 4.1 percent in 2016.We scored these victories with a heavy debt burden,” Minister Samaraweera said.

He said the government hoped to increase the allocation for education to 6 percent of GDP by 2025 and health expenditure to 3.5 percent of GDP in the next few years.

Gota should appear in Court, if not guilty - Mangala
Zahrah Imtiaz

Why is Gotabhaya Rajapaksa spending millions on lawyers to get injunction order to prevent his arrest? asked Finance and Mass Media Minister Mangala Samaraweera yesterday.

“If he is not guilty, he should appear in court,” he added. Responding to remarks made by Gotabhaya Rajapaksa that the former was scared of him, Minister Samaraweera said, “Yes I am and it is not only ‘I but many in this country are. I personally know what he is capable of”.

Addressing a media briefing at his Ministry yesterday, the minister read the list of cases in court the former Defence Secretary is suspected to have been involved in.

He read: According to Police reports, Rajapaksa is suspected to have intervened in: the alleged facilitation of an irregular diplomatic passport for Vinayagamoorthy Muralitharan alias Karuna Amman, in the alleged abduction and assault of Nation editor Keith Noyar by army intelligence officers, in the alleged murder of Sunday Leader editor, Lasantha Wickramatunga by Army Intelligence Officers, for the alleged assault of Rivira editor Upali Tennekoon by Army Intelligence Officers, for the alleged abduction and disappearance of journalist Prageeth Ekneligoda by Army Intelligence Officers in the alleged Welikada massacre of 26 prisoners and for the alleged shooting of pubic protesters in Weliweriya in 2013 which led to the death of three civilians.

“We are not making unfounded allegations,” the Minister said.

“These Army officers who had no enmity towards these people. It is very clear that they were following orders,” he further said.

“I can clearly state that it was Gotabhaya Rajapaksa behind this, the man we should all fear”. With regards to corruption, he noted Rajapaksa’s alleged involvement in the Avant Garde deal, the D.A.Rajapaksa memorial and the MiG deal which has an astounding USD 7.8 million allegedly being stolen through a shell company in England.

“His parents should be commemorated but not with alleged stolen money. If they were alive, they would be very disappointed that their children did this,” Samaraweera said.

Samaraweera also refuted allegations made by Rajapaksa that he went to meet the latter during the last Presidential election.

“In October of 2014, the Rajapaksas including Gotabhaya Rajapaksa asked to meet me.I told them to come meet me if they wanted and Mahinda Rajapaksa came to my house,” he said.

“They allege that the Prime minister too has crimes, but he never hid. When Batalanda came up, he faced the Presidential Commission. Similarly, when he was called before the Bond Commission, he faced that too, the minister said.

A Führer Calls in Sri Lanka

Mahinda Rajapaksa presidency ended but Gotabaya’s shadow state persisted. It was cemented too deep. It held on to its group mind.

by Nicholas Salmanovitch Rubashov- 
( May 21, 2018, Colombo, Sri Lanka Guardian) In the crucible of chaos, there is a simulated search for a strong man, a ‘Führer’ to take us to greatness, to preserve our culture, our values.
Hoopla is a European carnival game where competitors throw hoops around pegs. On Sunday 13th May 2018 Gotabaya Rajapakse played ‘Hoopla’ at the Shangri la. He put the hoop round the peg – the ‘Presidential Candidacy of the Pohottu party.
The hoopla at the Shangri-La last Sunday suggested that there is a strong and substantial body of thought in our polity, firm in its conviction that we are in need of a strong man, a man of action a man who delivers.
Last Sunday Gotabaya Rajapakse delivered two messages. The first was to us – ‘we the people’. He defined our problem for us. He told us that we are too infantile to understand our problem. So, he explained what our problem was.
Our problem was structural. Structural problems called for structural solutions. He was kind enough to present the first person plural point of view. We must make structural changes to the manner we think, to the manner we address basic economic issues etc.
Now, you must remember that he defined the structure of the problem and offered us the structure of the solution. Now what is the solution?
Aha! Not so fast my friends. Solutions will come after 2020 when I am on the saddle on the white stallion – the presidency.
Right now, this is the ‘Viyathmaga’ – the erudite way to place the bridle on the beast.
The second message was for his Brother – the former president who restricted by the 19th amendment must propose a candidate for the presidency to his undoubtedly sizable constituency that awaits his counsel, caution, direction and instruction.
Look around you! In to this place that bears the brand and the name of the mythical kingdom of abundance and plenty- the Shangri-La I have summoned the barons of industry, commerce and finance, the brave soldiers of the realm, the thought leaders of the mother land. Behold the sight. Digest, how docile and attentive they are!
Make no mistake. Here is a man who has a clear and a tight grip of conceptual power. He knows the difference between the government and the state. The government changed hands. The state moves on. He knows how it works. He knows, because he once ran it single handedly under the dispensation of his brother who presided over a fractious government listening to the smooth ticking of his watch never quite realizing the full genius of his brother- the watchmaker.
At the Shangri la on Sunday, he discovered how the watch maker assembled the intricate parts of the watch. And more! Mahinda heard the wake-up alarm.
The Shangri la gathering was a prelude to the possibility of our society being subject to an oligarchic collectivism. The term was coined by George Orwell in his novel 1984.
It describes a society that was already in the making before it was rudely intercepted by the change on 8th January 2015.
Then the new rulers decided to open the vaults of the central bank and all hell broke out. Greed to carve out political territory, mismanagement and sheer imbecility in governance prevented the dismantling of the edifice that was in place.
In the preceding five years – the post war years of development leaps and construction booms, government institutions, media and corporate interests moved under the control of a handful of individuals, linked together, collaborating to direct, regulate and benefit from each other and derive its share of profit, from the toil of the silent many- ‘we the people’.
It is all about control. It is control, that this government lacks. Although the government changed, the state mechanics remained intact.
Mahinda Rajapaksa presidency ended but Gotabaya’s shadow state persisted. It was cemented too deep. It held on to its group mind.
What we saw at the Shangri la is a phenomenon – a modern day Bonapartism. A determined man wants to replace the post-independence comprador class with post 2005 rent seekers wealth extractors and wealth creators of exceptional talent.
They are distinguished by their willingness to serve the state. Mind you, they will serve the state not the government. And you know who ‘State’ is.
The mainstream political parties have disintegrated in to power seeking, vote gathering machines operated by political freebooters.
As Hannah Arendt has painstakingly explained in her elegantly insightful prose, totalitarian movements are possible “wherever there are masses who for one reason or another have acquired the appetite for political organization.”
That was the spectacle we watched at the Shangri-La on last Sunday. What we saw gathered in the hugely opulent, hugely accommodative epitome of luxury was a “great flaccid body destitute of political education, almost inaccessible to ideas capable of ennobling action” ready to listen to a new ‘Pied Piper.’
In our current context, we should pay heed to Hannah Arendt one of 20th centuries great intellects who survived fascist tyranny and authored the classic political tract- Origins of Totalitarianism’.
As Hannah Arendt explains, masses are not held together by a consciousness of common interest. They do not have the capacity to either define their goals or to articulate them.
The ambitious manipulator and strong man not only notices this reality but takes in to account their sheer numbers, stupidity and indifference as factors that make up the equation of total control.
This indifferent segment of our society has begun to wake up after the hoopla in the Shangri la.
Those “ Kapuwatth Kola’ UNPers and ‘Kapuwath Nil” SLFPers on both sides of the barricade waiting for the crumbs off the patronage table do not make or unmake regimes.
It is the party neutral, indifferent majority who bring about regime change. They alone constitute the majority that matters.
This happened before in other lands. That it will happen here, is now a real possibility. There may arrive a day, when parliament will wake up to discover its total and absolute disconnect with the great mass that is apathetic and indifferent.
Then, those in parliament can go home with the assurance of the ‘Strong Man’ that he will take upon himself the terrible and horrible responsibility for the conduct of public affairs in an orderly manner.
It is in that sure knowledge, that the merchant princes marked their presence in the front row at the hoopla at the Shangri la.