Leasing Hambantota Port to China Selling our soul
Posted on December 19th, 2016

By Shivanthi Ranasinghe Courtesy Ceylon Today

Hypocrisy has smacked us hard this Christmas. A whole bandwagon got into social media to defend an artificial Christmas tree – at a time real trees in Wilpattu are felled at an alarming rate. The same defenders who saw opportunity in investing millions of rupees in a temporary structure fails to appreciate the permanent investment made in the Magampura Port in Hambantota. That project was a white elephant to social media and mainstream alike.

Today, that white elephant is to be leased for 99 years to a Chinese company that can be extended to another 99 years. Thus, that white elephant that is paid by us will not be ours for the next 198 years. If this was indeed a white elephant, with a rock in the middle that no ship can sail through as was purported, why would the Chinese be so interested in it?

Two Chinese companies had tendered proposals, which have been considered without defining the criteria for selection. One proposed one-time payment of U.S. $ 1080 for a 99-year lease. The second proposed an initial payment of approximately U.S. $ 730 million, but for a 50-year period. Throughout that period, a payment structure, similar to a royalty, had been proposed for the wharfage – i.e. accommodations provided at a wharf for the loading, unloading, or storage of goods and all the other port charges that comes to the Port. Thus the value of the second proposal is in fact approximately U.S. $ 1,500 million.

Revenue

Thus the two proposals were U.S. $ 1,080 million and U.S. $ 1,500 million respectively. Naturally, the Sri Lanka Ports Authority (SLPA) was interested in the second proposal as revenue is earned throughout the period – thus benefitting both the SLPA and the country.

However, the first proposal had been accepted. The objective of leasing the port was fuelled by the need for immediate funds. Therefore, though the accepted proposal offers actually less than the rejected proposal, it is an upfront lump sum payment. It shows the government’s disinterest in the long-term return.

In accepting the proposal, the existing systems had been bypassed. Normally, proposals are subjected to the approval of Technical Evaluation Committee (TEC) and Cabinet Appointed Negotiation Committee, which then would be sent to the Attorney General’s approval and to the Cabinet for its approval.

However, on this matter, a committee chaired by the PM had invited the investors for a discussion and a decision had been reached thereupon. Thus, though the framework agreement had been signed, proper technical evaluation reports and negotiation reports had been bypassed.

Furthermore, a proper valuation for the facilities, infrastructure and land that even includes a man-made 110-acre island had not been conducted. Thus, the deal is finalized at just the construction cost, discounting the fact that even a basic house appreciates in value after construction.

The one billion dollars would not be used to repay the loan. It will be deposited in the Central Bank of Sri Lanka (CBSL) to be used for other projects. It is still not clear who will be servicing the loan.

The government was voted in to prevent the country from becoming a Chinese colony under the previous administration’s watch. The controversial Colombo Port City Project caused much hyperventilation among environmentalists and others. The 99-year lease to the Chinese for that landmass to be artificially created on our seas generated much concern.

Disturbingly, not even a fraction of that concern is visible for an entire stretch of land amounting to 20,000 acres, that is inclusive of our port and its lands, given to the Chinese. However, it must be noted that a FaceBook post with nearly 600 viewers had commented ‘2’ when asked to comment as such if against the selling of the port.

Unfortunately, mainstream media’s attention was hijacked by a carefully orchestrated sequence of events. It started with the trade union action by the Hambantota Port Workers Guild to pressurize SLPA to absorb them in the wake of selling the port to a Chinese company. Generally, when trade unions even get a whiff of change of management – especially to privatization, their fight is to stop that change, not accommodate that change.

Meek acceptance

Hence, the violent protestors’ meek acceptance of the new owners is indeed a rare experience in Sri Lanka. They went to unnecessary lengths to keep the focus on their quest. This led to the involvement of the Navy. Then, to everyone’s surprise the Navy Commander most unnecessarily got involved in a fracas with a journalist quarter his size.

Immediately, social media got into action to defend the Navy Commander, who is actually a highly decorated officer, much respected by his peers. Throughout the two past years, the Navy came under a number of harassments such as:

• A team from the UN illegally conducted a tour of inspection in the Trincomalee Navy Base;
• The strategic Somapura (Sampur) Navy Base was removed;
• Nilaweli Navy Base was removed;
• A senior navy officer was publicly abused by the Eastern Province Chief Minister;
• Three Navy intelligence officers were severely assaulted by Tamil extremists.

When Vice Admiral Ravi Wijegunaratne had stayed tactfully out of all these controversies, it is indeed questionable why he got involved in this mess as he did. Either way, our attention was firmly locked into the drama. Journalists also joined in the fray by protesting over the assault just as vehemently as it was being defended in the social media.
Excitement
With all the excitement, we forget to ask whether a small country like ours can afford to give 20,000 acres to a foreign company for 200 years. It has equally rolled off our heads why the Chinese are so interested in our Port.
The Magampura Port was successfully marketed as an ego project of Mahinda Rajapaksa, that people are genuinely unaware of its real worth. Many actually believed that a huge rock made the Harbour untenable. The government changed, but we were not shown the rock, which is really a man-made fictional rock.
The 2015 CBSL annual report gives a clue to the real worth of an infrastructure that was designed to bring much investment to the country.

The Harbour’s annual income:
For 2011 – Rs. 11 million
For 2012 – Rs. 135 million
For 2013 – Rs. 565 million
For 2014 – Rs. 1,277 million
For 2015 – Rs. 2,145 million
Yet, the government sought a foreign entity to take over 80 per cent of a Private-Public Partnership.

Bunkering operations

In July 2014, the Port began its bunkering operations. From August-October, there was a profit of Rs. 580 million. However, during November-December, there was a loss due to drop in world oil prices. For November, the oil is taken in October. So when price drops, there is a loss. Likewise, for December, oil is taken in November. When prices drop, a loss is incurred. This is the bunkering physics experienced world over.

The present administration, looking at the final figures, concluded that bunkering was not profitable and stopped it. However, even a small shop cannot make profit from day one. It needs to be marketed, developed and promoted before becoming profitable.

Even the Colombo Harbour was struggling until 2014. In 2009, the revenue was Rs. 22 billion, which was a loss. The year 2010 also recorded a loss. In 2014, revenue reached to almost Rs. 37 billion and made a Rs. 8 billion profit after loan interest and foreign exchange loss.

Japanese loan

Loans taken to build the Hambantota Harbour had drawn much concern. However, the Colombo Harbour in 1985 needed a Japanese loan to meet its development plans. The yen then was around 0.25 – 0.30 cents. Since then it has risen to Rs 1.40-1.50. Still, these are necessary developments a country needs, though not small investments. It does take years, perhaps more than 10, just to make a dent in the bottomline – especially if starting from zero.

With regard to the Hambantota Port operations, two other scenarios were planned – the industrial zone and the container terminal. For the industrial zone, a marketing strategy was developed and Request for Proposals was called to which around 70 parties worldwide responded. This was narrowed to 27 and then to 11. The agreement was that these 11 investors to pay a minimum guarantee revenue. That means, whether they operate it or not, they pay the minimum guaranteed revenue. The total investments from these 11 investors were around US $ 1.1 billion. Furthermore, there was a lease rental, throughput charge, and all port handling charges.

For the container terminal, a joint venture with the Chinese of 65:35 was developed – 35 for SLPA and 65 for China and this was on the basis of a SOT – Supply Operate and Transfer – only. China puts equipment and that is their share. Thus, the entire container terminal equipment they were supposed to supply, and SLPA contribution only being the basic infrastructure. In addition, they agreed to give SLPA a royalty for box move. That means loading and discharging. Load or discharge, SLPA takes it as one move, so one container discharged and then loaded means two moves.

SLPA royalty

The agreement was to pay SLPA royalty starting from U.S. $ 2.56 per move, actually per TEU and that increase every year by one per cent. This was to be a 40-year agreement, but with a five-year grace period for the investors to complete their construction.

These two – the industrial zone and the container terminal operation model itself was projected to yield a reasonable revenue for SLPA to pay the major component of the loan. At the time, the loan was Rs. six billion per annum. However, due to rupee devaluation, it has gone up to about Rs eight billion.

Recently, Ports and Shipping Minister Arjuna Ranatunga charged that the SLPA incurred a loss of Rs 18 billion. However, again it is not because of the loans as is evident from the SLPA 2015 accounts. It is because of the rupee devaluation. The loan value was
U.S. $ one billion. Rupee devalued by more than
Rs 20, resulted in a Rs 20 billion loss. In turn, it has resulted in a foreign exchange loss of U.S. $18 billion in SLPA accounts.
The operational cost for Hambantota was very low. It had a different model compared to Colombo with less than 500 people, paid according to the company payment structure. Thus it was possible to earn an operational profit.

Annual revenue

Bunkering revenue was a totally different scenario. To minimize any burden to the Colombo Harbour, the East Terminal was built and container cranes were ordered. With these in place an annual revenue of Rs. 15 billion can be easily generated. The operational costs are only Rs Three billion. That additional revenue was to be used to pay the balance part of the Hambantota loan. Therefore, the project never really had any payment issues.

The cranes were supposed to arrive in Colombo terminal in 2015. Yet, despite the forecasts and plans, the bunkering operations were stopped and so were the cranes. As a result, there is a terminal in Colombo Harbour idling for the past two years. Unfortunately, the revenue lost for the country as a consequence has not caught anyone’s attention yet. Except for the agreement with the Laugh Gas, other 10 had also been cancelled.

The reason being the administration really believed these to be corrupt deals. In their assumption, they failed to verify the agreements that have been ratified by the aforementioned committees. TEC took two years to evaluate the companies. The agreements were only signed after the Cabinet’s and Attorney General’s approval.

At the end of the day, our blind faith in politicians’ rhetoric, social media’s fancy posts and mainstream media’s failure to be true investigative journalists have resulted in the most treacherous act of our times – the outright selling of our most strategic investment. This was poised to take us to the big leagues, surpassing Singapore and Dubai. Americans and Indians who lent their unstinted support to dislodge the Rajapaksa administration, so as to weaken the Chinese presence must be banging their heads on the wall. However, their bruised heads are of little comfort to us, for our self-inflicted wounds are much graver.

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16 Responses to “Leasing Hambantota Port to China Selling our soul”

  1. Dilrook Says:

    For the first time I disagree with Shivanthi. The sale (or long term lease) to China (not the terms of the trade) is good. Sri Lanka has been hopeless in attracting business to the port. China will rapidly develop it as part of its One Belt One Road strategy connecting Hambantota to Gwadar, Thailand and the Far East. If China gets 15,000 acres around the area, it will enormously benefit the nation and the two poorest Sinhala districts – Hambantota and Monaragala. If all goes to plan, this region alone will be able to save Sri Lanka from its debt crisis, balance of payment crisis and the dwindling exports crisis. Chinese presence will deter our perennial enemy – India.

    It will also reduce politicians meddling in the port and the swings in foreign investment climate. Opposition politicians must do better not to get into the bad books of China as they have already lost the west and India. Otherwise, they would be rejected by both the east and the west.

  2. Randeniyage Says:

    From what I have observed Dilrook’s ideas are “practical” or realist.
    1. Since there is no politician who is interested pushing for removal of 13A and cutting down waste, (and knowing that current systems is worse than Indian model) he thinks we should demand Indian model and ZERO Tamil in Sinhala areas.
    2. His priorities are well chosen, COUNTRY, then Nationality followed by POLITICS.
    Normal peasants with same priorities think differently. They don’t accept currently we have a worse model than Indian model.
    Similarly, regarding Hambantota, one might think, if the country somehow develops rapidly with Chinese investments, UNP will become more powerful and hence division of the country become concrete. But that is , one is changing priorities, Nationality become first and the country 2nd. Is that ‘Patriotism’ ? I suppose not. So, I have to agree with Dilrook in that sense. Moreover, as he says it is one of the poorest Sinhala majority area. (In spite of having a PM and President from the area for 11 years)
    However, I am very ‘optimistic’, may not even be ‘realistic’. I am forever waiting for that GOOD POLITICIAN to arrive from nowhere. If Chinese can do business why can’t we ? Having competed with some smartest Chinses I think WE CAN. Therefore, JV is OK but we should have a minimum of 60% stake, I think. Outright leasing without any stake is a big NO.

  3. Dilrook Says:

    @Randeniyage

    I don’t demand the Indian model over a real unitary state. The Indian model is better than all forms of other federal models proposed and even currently enacted in Sri Lanka.

    It is reasonable use of Tamil language in other areas without awarding it the national and official language status throughout the country (13A and 16A to blame). Not entirely no use.

    Chinese Ambassador to Sri Lanka, Yi Xianliang, recently catalogued Chinese investment-commitments in South Asia, under the One Belt One Road initiative, as follows: US$ 46 billion in Pakistan, US$ 22 billion in India, US$ 20 billion in Bangladesh, and US$ 17 billion in Sri Lanka. [Quoted from Chinese Ambassador to Sri Lanka, Yi Xianliang, spoke at the inaugural session of the ISAS-RCSS international workshop on ‘China and South Asia’ held in Colombo on 5 December 2016.]

    If $17 billion Chinese investments in Sri Lanka go ahead (part of it already invested) it can rapidly develop Sri Lanka in income generating sectors. It is an unimaginably large investment. Only a fraction of it has been invested already.

  4. Christie Says:

    This is a very interesting development. It has come out of the blue. Browsing Indian or Chinese media does not give any clues. Is Ranil going to play the same game that Mahinda did and keep India out and Indian colonial parasites at bay? Or will ETCA and braking up the country with devolution to follow That is what India wants. Note that India is not going to give as a Rupee for ETCA and for dividing the country.

  5. Ancient Sinhalaya Says:

    Erroneous article. Just google american nuke bases dotted around Biking Atoll circling China. Us resent the Chinese
    becoming the world leader and have encircled the China by setting up these bases. So called peace lover harak
    obama spent most money on defence, putting up these bases, in us’s history. Us don’t want the Chinese domination
    in the indian ocean so they object to any Chinese involvement in the region. Obviously Sri Lanka, Thailand etc. are
    in the public eye and can’t do war mongering in the region like in the remote Bikin Atolls. So they resort to these underhand propaganda and the
    us-biased media make a lot of fuss about Hambantota. If Hambantota is free of Chinese, india, us, uk etc. can do
    anything at will. Sadly Sri Lankans don’t understand. Or Sinhala modayas going to be duped again?

    Cast your mind back to MR’s time. We all know Sinhalaya famous for being modayas. There is more. They have
    very very short memories as well. They don’t remember during MR’s time all the so called powerful countries
    pressurised him without any success. No stopping war, no breaking up Sri Lanka, rapid development. Who gave all
    that Sinhala brain-dead modayas? It was the Chinse.

    Chinese is the best antibiotic to keep the rashes us, uk, france, india, diasporats etc. etc away. When the Chinese
    are around they leave Sri Lanka alone. Indians just disappear. So please please don’t fall for these false propaganda. Chinese are coming
    to do business, not to drop an atomic bomb on Sri Lanka. Just look at from 2005-2014. What happened to Sri Lanka.
    Best period for Sri Lanka. Or go along with yankee dickie for 100 years without seeing an inch of motorways, any development etc. etc. and break up Sri Lanka.

  6. RohanJay Says:

    In Sri Lanka’s case a close relationship with China is a must if it us to prosper. That’s why those protesters at port were so stupid besides illegally holding two cargo ships. Personally if China wants the whole port let them have it. Which is what current govt is trying to do and its the right one after realising they won’t get any real help from NATO countries the west and India. I agree with Dilrook. In Sri Lanka’s case a close relationship with China is very beneficial. Plus China has been a very good friend of SL for the last 50 years. Where as China is detrimental trade wise to a country like United States and its economy which is why Donald Trump correctly opposes China. In a small country like Sri Lanka a close China relationship is essential for the growth of Lanka economy. Besides history suggest China has been a good honest friend to Sri Lanka. So I don’t see the problem for China to privatise harbour which the protesters were protesting about.

  7. Christie Says:

    The protesters were Indian puppets the JVP. They are used by India and Indian colonial parasites to kill Sinhalese. They killed Sinhalese and they themselves got killed by Sinhalese. Indian Empire and Indian colonial parasites are the winners.

  8. aloy Says:

    We need friends to give us help when the situation demands. Portuguese also first came as friends. Then they took control of coastal areas and enforced tax and other slavery on our people. Then came the Dutch also as friends to chase away the Portuguese. They all started with port and made Forts everywhere, to defend themselves. Chinese too will do the same and will stay for over two hundred years with these agreements. We cannot expect protection from anybody (except perhaps Putin). When we were in trouble with India, US just looked other way and it was up to Pakistan to give us some help.
    We are going to give a sizeable part of the south not because we want protection but because our previous government ruined us economically and put us in deep debts. What is the economic benefit from all the loans we got from China?. Norochchalai?.
    With mutual consent on the election night another set of crooks took over (please remember the architect was protected by MR himself when he was in trouble). Now we see where we they are going. And it is to a complete destruction. We should not keep any faith on what these people do. It is just plain robbery. Very soon the Rupee will hit 160s. No investor can make profits in such a situation. They are selling and leaving. This was the warning even a government minister like Patali was saying recently.
    We need some one clean to steady the ship and be non aligned. Perhaps MS should make a start on the investigation on Bond Scam and ask the speaker to step in as the PM as an interim measure. But I do not think he has the guts to do it. He must be thinking about the proverbial wisdom: if he cannot beat them, join them. Someone should tell the people to bear it up for a while and clean up the mess. Money still comes in from foreign employments and some local industries and we have the food security. I think, that someone should be from military as there is no other person in sight.

  9. Ananda-USA Says:

    Aloy,

    You said “we are going to give a sizeable part of the South not because we want protection but because the previous government ruined us economically and put us in deep debt.”

    Only the first part of your statement is TRUE, but the second part of your statement is FALSE because it assigns the debt to the PREVIOUS govt and not to the current govt. Let me explain.

    The previous govt allocated only 750 acres in a 99-year lease to China to get their help in generating income through the port which they financed and built.

    That loan from China for that was being serviced through annual payments and the payments were well within the ability of the govt to pay. In fact, when the UPFA govt handed over power to the Yamapalanaya, the total national debt stood at about 78% of the GDP, which was much lower than the dabt ratio that the UPFA inherited in 2006.

    Loans taken for well structured and managed infrastructure development are universally acknowledged as the best method of investing govt money. That is a long term INFRASTRUCTURE INVESTMENT, much like the freeways and Airport that MR built, that will yield recurring benefits and stimulate economic growth, not a CONSUMPTION expense like the Rs 10,000 pay hike that the Yamapalanaya gave to win the election.

    It is the Yamapalanaya that pushed Sri Lanka into the abyss of debt though econic mis management and wholes ale theft in the shot son of 18 months!

    They did that by demonizing the lender China, halting all Chinese projects, and associated economic activity in the country that decreased govt income, engineering the GREAT CENTRAL BANK ROBBERY to the tune of $2.5 billion to fund a war-chest for the future, by BRIBING the public employees with Rs 10,000 which it could not afford, by decreasing investor confidence that created an exodus of foreign investment capital from the country, and by relying on the West including the infamous World Bank, the IMF, and various Western Govt’s that egged on the regime change to come through with money to replace the Chinese loans. As we all know, the Western funds did not come through; they would have learned not to do that had they asked Mahinda or studied our historical experience getting substantial chunks of funds from the West! They are big talkers, but poor givers …. cunning shylocks that want to put you in trouble, bleed you dry and impose their political agenda.

    Please don’t start hanging Yamapalanaya mistakes on the neck of the previous MR/UPFA government, which was rapidly developing the nation in a fiscally prudent way that was well within our resources to mabage the payments.

    Blame the CROOKS & NOVICE BU GLERS of the Yamapalanaya for our CURRENT MESS!

    Sooner we OUST these CROOKS UNPATRITIC BUNGLERS the BETTER it will be for Sri Lanka!

  10. Ananda-USA Says:

    Also,

    The Yamapalanaya wants to give 15,000 acres in the South to China on a longer lease compared to the 750 acre 99-year lease that the MR/UPFA govt gave.

    Once again, that was to reduce the loan principal that the Yamapalanaya could not pay interest on, because they had mismanaged the rest of the economy and finances!

    It is a Yamapalanaya created problem, not a MR/UPFA problem, and now it is OUR problem, because 15,000 acres is far too large to give to ANY foreign country on a lease of any kind.

    That is what MR told the Chinese on his recent visit to China. There are reports that China accepted his advice, but there are reports that they are insisting on 15,000 acres as well!

    What a TERRIBLE MESS these UNPATRIOTIC STUPID Yamapalanaya has gotten us into!

  11. Ananda-USA Says:

    Eleven Container ships ARRIVING in 10 days!

    That is NOT a WHITE ELEPHANT, but a CASH COW!

    Ado Yamapalanaya, Thopi Pal Boru Karayo Sangamayak!

    ……………………………………….
    Sri Lanka Navy renders assistance to 11 merchant vessels arrived at Hambantota Port
    Thu, Dec 22, 2016, 09:15 pm SL Time, ColomboPage News Desk, Sri Lanka.

    Dec 22, Colombo: According to the Navy media, Sri Lanka Navy personnel stationed at the Port of Hambantota had rendered assistance to eleven merchant vessels which arrived at the harbor from 10th to 21st December 2016.

    The Navy initially assisted operations of nine vessels – MV Hyperion Highway, MV Hoyanger, MV Glovis Phoneix, MV Van Cherry, MV Pearl Ace, MV Paglia, MV Morning Christina, MV Positive Brave, and MV Delphinus Leader.

    Two more Merchant Vessels – MV Morning Cornet and MV Ryujin also made their ports of call at the Port of Hambantota yesterday (21). Majority of these vessels belongs to some of the leading shipping agents in the world.

    The Navy said its action to release MV Hyperion Highway and subsequent assistance rendered to continue harbor operations immensely helped to win the international shipping community’s confidence in Sri Lanka back again.

    By handling key operations, which includes handling mooring ropes, operating tugs and pilot boats, loading and unloading of vehicles and cargo at Hambantota harbor, Sri Lanka Navy had shown their highest level of professionalism and confidence in such operations, the Ministry of Defense said.

  12. Ananda-USA Says:

    even as the general public is being asked to tighten belts, there is little evidence of leading by example on the part of the country’s parliamentarians.

    BELT TIGHTENING for ordinary citizens,
    AMUDEY LOOSENING for the Yamapalanaya FAT CATS!

    ……………………………………..
    Sri Lanka’s economy marches slowly into 2017
    Thu, Dec 22, 2016, 07:06 pm SL Time, ColomboPage News Desk, Sri Lanka.

    Dec 22 (IPS) Sri Lanka’s meandering economic progress received a boost in November 2016 with the announcement of the proposed 2017 budget. Under the watchful eye of the IMF, reversing flagging revenue collection is finally the centrepiece for fiscal consolidation after more than a year of policy disarray.

    The revenue reforms include a sharp jump in the value-added tax rate from 11 to 15 per cent, which will draw more people into personal income tax thresholds, and new taxes on capital gains and property. The tax changes are modestly redistributive, but the risk is that almost everyone will feel worse off.

    This risk appears to have already materialised, with Sri Lanka’s share market remaining flat following the budget announcement, as has overall business confidence with sporadic strikes against some of the announced measures by traders and unions. With the economy growing at a modest 4 per cent in the first nine months of 2016, the prospect of higher taxes means that consumers will tighten their belts just when the economy could do with some extra spending.

    Investors will also be deterred by higher taxes on corporate incomes and capital gains in the midst of a tight monetary policy stance that has seen a steady upward movement in interest rates. Fiscal tightening, a soft inflation target and a flexible exchange rate are the three key elements of the medium-term macroeconomic adjustment framework under Sri Lanka’s IMF agreement. Once implemented, these measures are expected to restore macroeconomic stability amid a modest overall growth outlook.

    The IMF-aligned measures have drawn the usual criticism that fiscal austerity leads to a stagnant or shrinking economy, at least in the short run, and needlessly exacerbates debt burdens. The hard reality is that there is little choice but to push ahead with the announced proposals to fix Sri Lanka’s fiscal woes. Once a semblance of fiscal control has been restored, the impact of such austerity on the country’s immediate growth outlook can be partially offset by easing monetary policy.

    The most pressing question is whether the period of austerity will be used effectively to help revive a sluggish economy. Recent available data for the first eight months of the year paints a worrying picture; export earnings have contracted by 4 per cent (on top of a 3.4 per cent contraction in 2015) and FDI inflows have continued to contract by 37 per cent (adding to the 41 per cent contraction in 2015). On a more positive note, trade deals with both India and China – expected to be signed in 2017 – may help boost investor confidence.

    Other positive contributors to growth could include the resumption of Chinese-financed infrastructure projects – such as the US$1.4 billion Colombo Port City – and efforts to tie up exclusive export processing zones for Chinese investments in southern Sri Lanka. But these policy initiatives need to be coordinated and prioritised on a much broader scale if the economy is to see a transformational shift from consumption and public investment driven growth to private investment and export-led growth. Much of the blame lies in the government’s slow-footed response to present a promised medium-term economic agenda that sets a clear direction on the economic front and details structural reforms for growth.

    There is no obvious political constraint for this delay. In July 2016, Sri Lanka’s national unity government – made up of the United National Party and the Sri Lanka Freedom Party – announced that it will extend the alliance from the initial two years until the end of the current parliamentary term in 2020. This politically expedient move brings with it a convergence of interests and an assurance of stability.

    But 2017 promises to be a testing year for the governing alliance. It has to ensure political and social consensus for a successful constitutional reform effort. At the same time, it has to deliver economic relief to consumers disaffected by tax-induced price increases and tight economic conditions.

    It is perhaps not the most propitious moment to unleash an economic reform agenda. The government has been peculiarly inept in fostering public support or a social compact for reforms; even as the general public is being asked to tighten belts, there is little evidence of leading by example on the part of the country’s parliamentarians.

    But economic policy changes to help markets work more efficiently are needed if the Sri Lankan economy is to lift its medium-term growth outlook. It will be better for the government to ride out any fallout now rather than later, keeping in mind that there is still time for the benefits of reforms to be felt before 2020 approaches. If Sri Lanka’s government begins to deliver on reforms in 2017 – in what is expected to be a more conducive macroeconomic environment – then at least there can be some incremental progress towards a Sri Lankan economic resurgence.

    Read More:: IPS (Source)

  13. Dilrook Says:

    If the China deal doesn’t go ahead, Sri Lanka will have to depend on US, EU, Indian, Tamil diaspora, IMF and WB investments. Their investments come with political demands.

    This is why it must go ahead. The ideal of Sri Lanka managing all these with sufficient profitability and linking with China’s One Belt One Road initiative is too far fetched. It will not happen. Given the worsening balance of payment crisis since 2010, debt crisis growing since 2009, slowing GDP growth rate since 2012 and the export crisis since 2014, we badly need large investments without political strings attached.

    It is a matter of two unattractive choices. Idealism is not one of the choices.

  14. aloy Says:

    No problem giving Hambanthota to China but with all the safeguards to make sure we will not become a chinese colony. Remember Portugal was/is a small country with only a population of 10m as at now. Dutch and British also around 60m. Unlike Australia, Canada, new Zealand etc. they could not completely take over us as we were also a sizeable population. But with Chinese or India it is a complete different story. After taking over these large areas they can easily overwhelm us as they are in Billions. It seems already about a million chinese have lined up to enter SL.
    Our foolish leaders should not mortgage our country because of some economic problems we have right now. If all our people are engaged on economic activities in the proper way we should be able to come out of this mess without much problems. We should not hand over the planning to a bunch idiots (the Royal College lot who do not see beyond Colombo 7) who are being taken to Tirupathy etc. by their diaspora handlers seemingly for quick economic success.

  15. Ananda-USA Says:

    Aloy,

    I agree with you fully in what you wrote above.

    First and foremost, we should be CLEAR in OUR MINDS as to what the whole purpose and objective of governing our country is.

    It is to provide as secure and as good a life as possible for ALL of our citizens and their future descendents, in perpetuity.

    We must then ask …. what us our measure of the quality of life that is “good” that we wish to attain?

    That measure must be achievable without adverse consequences in the future so some trade-offs will be necessary. One measure of what is achievable is what the richest and best-managed nations in the West have achieved for their people. For example,

    1. We are rightly proud of our heritage, our language, our religion and our existence as an independent sovereign people that enables us to preserve those virtures in perpetuity.

    2. Therefore, we don’t want to pursue short-term economic growth by taking steps that would compromise those goals, such as permitting the influx of foreigners, including Indians, Chinese and Muslims in such numbers so that they would ultimately overwhelm the native people of Sri Lanka in numbers.

    3. We don’t want to keep Sri Lanka economically backward, inducing our poor people to leave Sri zlanka and work abroad on a permanent, or semi-permanent, basis. That would only drive the elite in Sri Lanka to argue for importing foreign workers to serve them and work in their businesses which in the long term would change the demographics of our country. In effect we would have EXPORTED the most poor rural citizens, the most PATRIOTIC of our citizens to slave abroad for a living, while IMPORTING even poorer foreigners froM other countries to settle in and repopulate our motherland. Since that is not our goal, as soon as possible we must bring our country to the same level as the developed nations of the West, recall our people slaving all over the globe, provide them good jobs in our country and a more meaningful existence living among their families in their beloved ancestral land. That should be the ULTIMATE GOAL of economic development.

    4. While rapid economic growth is desirable for the reasons given above, we must be committed to maintain as pristine a natural environment as we can in our land. We have all heard of the price the Chinese have paid in environmental degradation srving the world as it’s industrial powerhouse to hoist themselves into their current status as the world’s richest bankers while the per capita income of Chinese citizens is much lower than that of even Sri Lanka. While frugality and hardworking are terrific virtues, we must not let Sri Lanka suffer the same fate of environmental degradation.

    There are some indications of environmental degradation already in Sri Lanka. The mysterious Kidney Disease, contamination of drinking water supplies, spread if vector borne diseases such as dengue and malaria, changes in weather patterns and droughts and floods due to local deforestation and global warming, the vanishing of native flora and fauna at an alarming rate are among them. The rise in non-traditional diseases among people, such as cancers and breathing ailments, and water borne diseases are further indications of the environment we inhabit coming under stress.

    To address these environmental issues, we need to evaluate every societal choice critically. Whether it is opting for renewable energy over burning fossil fuels, providing clean treated water for human consumption, promoting greenhouse cultivation with drip or hydroponic irrigation, developing and enforcing standards for construction of homes and business buildings, developing systems for removing and processing garbage and sewer systems for the least impact on our health and our purses, we must balance the environmental impact against the economic impact.

    Happily, in most cases the environmentally green solution turns out to be the best economic solution also in the long term.

    5. Finally, all these things can be achieved only if we have a peaceful and stable nation that is governed in the best interests of the greatest number of people. That can be assured only by keeping out disruptive foreign forces and suppressing as EARLY AS POSSIBLE those who are fundamentally opposed to the wishes of the majority of the citizenry.

    For that we need a Constitution that creates a highly stable, yet streamlined and efficient, form of governance without the proliferation of unnecessary levels of sub-national administrations that only promote division on the one hand, and operational and financial inefficiency on the other.

    We need a powerful central government that can keep the nation together and is ready, able and willing to ensure peace and stability, and has sufficient military muscle to bloddy the noses of dven the biggest of foreign aggressors.

    While extreme centralization is dictatorship, extreme decentralization amounts to anarchy, as we see in many nations of the Middle East given the Arab Spring treatment by Western Neocolonialists plying their own agendas in recent years!

    A happy medium that tuned to the threats Sri Lanka faces now can be and must be found. My ideas on that will be published in a separate article in the near future.

  16. aloy Says:

    Ananda,

    Agreed 100%. This article along with all our comments should be sent to all party leaders and translations to National media.

    Thank you.

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