YAHAPALANA AND THE ECONOMY Part 4
Posted on July 10th, 2017
KAMALIKA PIERIS
Yahapalana government does not seem interested in developing the stock market. The stock market is in decline. The Securities and Exchange Commission (CSE) All Share Price Index (ASPI) which significantly outperformed major global indices such as the MSCI World, Dow Jones, FTSE100 and DAX during 2010-2013, dismissed however, as mostly pump and dump thanks to the stock market mafia, has seen a 10 per cent drop from 2015 to 2016.
Stock brokers are directed to maintain a minimum shareholder’s fund requirement of Rs. 100 million or 50 per cent of the firm’s stated capital, whichever is higher. This will affect profits. The ‘big’ guys will welcome this, said critics.. Cash-flows are strapped by the SEC’s new rules in capital adequacy. Withholding Taxes (WHT) has been raised to 14 per cent from 10 per cent for debentures. Who will now in invest in debentures?” stock brokers asked. The country’s stock market is done for, they warn.
Some stockbrokers are closing their outstation branches . About 12 branches were closed by March 2017.some companies are mulling pay cuts as well.. However, CSE officials said that since April 2017, the CSE has showed buoyancy. Some branches are on CSE premises which are subsidized by the CSE. Branches at Matara, Kandy, Kurunegala, Negombo and Jaffna are highly subsidized. They pay a minimal rent only and no utilities,” a CSE official said, adding that now with retailers rejoining the CSE things may change for the better. Some Yahapalana manufacturing ventures have been a flat failure. Volkswagen’s local agent Senok Automobiles headed by Noel Selvanayagam , announced in Sept 2015, that they had entered into an agreement with BOI for a multimillion dollar investment by Volkswagen, for which they were given land in Kuliyapitiya. Selvanayagam obtained the necessary clearances from the various government authorities and Senok started preparing the land for the plant.
Yahapalana was jubilant. The Volkswagen plant would be a major leapfrog for the country in the right direction, said Yahapalana . It showed Lanka’s growing attractiveness as a destination. Volkswagen is currently the world leader in automobile manufacture, having overtaken Toyota of Japan. Volkswagen had attempted to set up a plant in Sri Lanka since 2008 but failed due to ‘various’ reasons. Yahapalana government had expressed an interest and spoken to the German Ambassador.
Then it was announced that Volkswagen is not coming to Kuliyapitiya. The excuse trotted out by Yahapalana government was that Volkswagen soon after faced an issue regarding some of their diesel models in the US. This had cost Volkswagen US$ 18 billion in losses. But this was challenged. A spokesman for Volkswagen stated on TV there were never any plans for a Volkswagen investment in Sri Lanka. In Germany Volkswagen said they had no plans for Sri Lanka. Volkswagen itself has never said it was coming The German Ambassador said that everywhere he goes he is asked about the Volkawagen factory. He said that neither the Volkswagen Company or the German embassy had anything to do with whatever was started in Kuliyapitiya.
Experts said that it has been obvious that Volkswagen would not be coming here since it was already based in India. Why should Volkswagen invest in Sri Lanka when they have a plant in India, which is capable of producing 200,000 vehicles per annum. Further, Volkswagen has now changed to the manufacture of European cars.
The project was immediately dubbed Hoaxwagen”. Under the excuse of Volkswagen, it was said, Yahapalana had handed over valuable land to Noel Selvanayagam, president of Senok automobiles. He had also, it was alleged, secured a range of concessions from the government. The plant was renamed Western Automobile” . Senok Automobiles then signed an amended agreement with BOI, in Jan 2017 in which the Kuliyapitiya land was given on a freehold basis to the newly created ‘ Western Automobile Assembly’ for a proposed vehicle assembly plant. There was no reference to Volkswagen.
At no point at the foundation laying ceremony had there been any mention of the plant being for Volkswagen . At the ground breaking ceremony neither the German ambassador nor a representative from Volkswagen was present. Media noted that the logo created by Western Automobile resembled the logo for Volkswagen . Western Automobile will eventually turn out 10,000 to 15,000 diesel cars of 1000 cc to 2000 per year. Initially, with a modest capacity to turn out 500 units, it will only serve the domestic market for the first three years said supporters.
It was reported that Italian tire giant Maragoni of Italy would invest in the rigid tyre project at Wagawatta, Horana , described as Sri Lanka largest integrated tire project’. The Wagawatta Horana tire factory would export mostly to Europe and would provide 3000 jobs. The massive 100 acres for Wagawatta was approved by cabinet on a proposal by Malik Samarawickrema, Minister for Development strategies and International trade .BOI was giving it a ten year tax holiday. But Maragoni promptly distanced itself from the project. There was no such linkup and no such contract has been signed with BOI, Maragoni said. The tyre plant was suspended.
Plans are underway, said the media, to build a sugar factory at a 149 hectare land in Dehigama and Akiriyan Kumbura divisions in close proximity to the Nilgala reserve in Moneragala. The Rajapaksa government had in 2007 planned to hand over of 62,500 acres in the area to a British company, apparently Booker Tate. But the local promoters of the project had denied claims that land was being given to a British company. They said the company was providing technical know-how and other support. The same name of Booker Tate British consultancy firm has transpired once again after more than nine years in the latest move to resurrect the project by the present government, said the media. The local agent of this project is I.M.S. Holdings, the same company that was involved in the project earlier. A Thailand company affiliated to Booker Tate has stepped in this time as foreign collaborator to invest over US$110 million to establish the sugar factory in Moneragala, sources said. –
In July 2015 the BOI signed an agreement with MG Sugars Lanka to revive the Kantalai sugar Factory. The company, a partnership between Bangalore-based Shri Prabulingeshwar Sugars Chemicals Ltd and Singapore’s SLI Development Pte Ltd, had agreed to invest US$100 million. The company had conducted a $2 million feasibility study on the project through a German Company Bosh. It planned to process 500,000 metric tons of sugarcane within 18 months after re-launching the factory providing benefits for 25,000 farmer families in the area. The total number of direct employment generation would be around 1,220. Yahapalana has released 65,000 acres in Rideemaliyadda for the factory. The land was handed over to the Board of Investment (BOI) to proceed with the project,
JVP Leader and Chief Opposition Whip Anura Kumara Dissanayake vehemently opposed in Parliament, the proposal to grant 65,000 acres in Rideemaliyadda to a foreign company to start a sugar factory. Moving an Adjournment Motion in the House, the MP urged the government not to proceed with the proposed Uva-Wellassa Sugar Industry project, highlighting its detrimental impact on the environment, archaeological heritage and the lives of the people of the area.
This project was abruptly halted by the previous Rajapaksa regime in 2007 following vigorous protests of residents and environmentalists, he said. The project is now restarted, with plans to cultivate sugarcane in around 62,500 acres of fertile land in Maduru oya reserve area instead of lands from Nilgala, Gal oya and Maduru oya reserves which were proposed in the 2007 project. The proposed strip of land is located in between Nilgala and Maduru oya reserves. About seven archaeological sites are located in that area. The proposed project damages the entire eco-system and aggravates the human-elephant conflict. We demand a comprehensive Environmental Impact Assessment (EIA) covering the whole area of this project,” he said. .
Dissanayake said the project was aimed at producing 80,000 metric tonnes of sugar, adding that it requires 2.8 million litres of water on the first day of its operation. How are you going to get this water? Is it from Maduru Oya? This is a very large factory. Even if we join Hingurana, Kantalai, Sevanagala and Pelawatte sugar factories together, the extent of land would be less than 40,000 acres, but this factory has an extent of 65,000 acres,” he said. Dissanayake said the Government was going to distribute 5 acres each for 7,500 farmers with the condition of cultivating only sugar cane, adding that this would in turn make them laborers of the factory. He called on the Government to stop this project and follow an environmental friendly development approach when utilizing those lands.
John Murphy, President of the Coca Cola Company Asia Pacific Group and Irial Finan, Executive Vice President, met Finance Minister Ravi Karunanayake. They said that Sri Lanka could be developed as a production hub to re-export Coca Cola products to India. India has the highest demand for Coca Cola products in the South Asian region. Sri Lanka could benefit from the arrangement by earning huge amounts of foreign exchange, even while generating jobs for the youth. The Coca cola officials had discussed with Ravi Karunanayake about the use of Sri Lanka natural water resources and tea related products to manufacture Coca Cola and re-export the products.
EPDP leader Parliamentarian Douglas Devananda pointed out that this Coca Cola factory would further reduce the island’s already diminishing natural water sources .Coca Cola Company was attempting to set up its largest manufacturing plant in the South Asian region in Sri Lanka to supply to its largest market in the region which is India. Devananda said that currently the Coca Cola was facing serious criticism in India. He added that there were around 57 Coca Cola plants in India and they were charged with violation of the water usage limits. That is why the Coca Cola Company was planning to set up its manufacturing plant in Sri Lanka and use our water sources. ( Concluded)
July 11th, 2017 at 2:14 pm
In this section the writer is talking about ventures that bring in dollars. In earlier sections she was complaining about why local service industries (which do not bring in any dollars) are not allowed to operate as they wish withoutb any rules and regulations and also allowed to obtain business related items such as vehicles at low cost which require foreign exchange to import.
All the ventures mentioned in this part are turn key operations – meaning no local expert knowledge is required. All that the investor looking for is natural resources and cheap labor. Again this speak volumes for how ineffective our 80 year old investment in higher education has been. Basically we do not have a local knowledge base in any technology area. Recently there have been some capabilities developed in software and accounting which is a good thing. But the politicians and senior professionals and officials have no interest in gearing the country towards developing its own technology prowess’s but simply act as agents of foreign investors to gain personal favors for their so called elite social class that exists in every developing country that is going the opposite direction towards less prosperity and less sophistication.
Along with these turn key operations well meaning leaders should also take steps to start ventures that utilize local brain power to develop local technology capabilities in well thought out areas. Fundamental research is not necessary for this purpose. technology transfer from where they exist already can be an effective way. Hyundai and Samsung in South Korea are good examples of ventures started in this manner
July 11th, 2017 at 6:44 pm
What Sena says is true. However, there is widespread hate of capitalism in Sri Lanka among the most economically backward community – Sinhala Buddhists. All minorities hate socialism and love capitalism. Sadly, Buddhists have been misled by various socialist/communist parties financed by now dead Soviet Union, North Korea (before 1972) and China. Most of them have gone bankrupt. Only the JVP stands for it. However, the attitudinal damage they have done remains.
As a result, very few Sinhala Buddhists get into businesses, expand these aggressively (at times you either expand or die) or encourage the government to do business making profit.
They don’t have a problem with foreign investors doing the same thing!
They are happy working for abusive Arabic masters.
This stupidity must be rooted out from the heads of the majority. Capitalism must be embraced and profit making must be glorified. As Deng Xiaoping said it is glorious to make money. Local investors must get incentives, not foreign investors. When investors are local, profit goes local. Large management fees stays within the country. Locals decide who they employ, not foreigners. Locals care about the environment more, not foreigners.
State must not invest until this widespread capitalist profit-seeking attitude is created in the society. Otherwise it will be waste. For instance, pumping more money to Mihin Air or Srilanka Airlines is a waste as they are not run for profit. Losses are covered by taxing everyone until it becomes unbearable when they are sold to foreigners at a penny.
(Whenever capitalism is mentioned some tend to jump to extremes. Anything of extremes is bad. What is required is a large shift from socialism to far more capitalism within the majority. This is how the world works.)
July 11th, 2017 at 10:46 pm
Our economy is in the hands of the minority the Indian Colonial Parasites.
Any comments please.
July 12th, 2017 at 5:42 am
Agree with all three comments above. Sinhalese should embrace a modicum of capitalism. Our leaders should encourage businessmen building companies little by little instead of trying to get rich overnight.
July 12th, 2017 at 1:43 pm
A sane balance between Captalism & Socialism must be maintained.
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Some points to note :
* GDP measurement does not reflect the true state of wellbeing of the Peope in a country.
PQLI does.
* State LAND must be used wisely for local people.
Apart from State LAND that is set aside for Environmental purposes, the rest of it can be leased out to Co-op type enterprises to grow ORGANIC produce (sans the deadly Glyphosate). How do other countries manage to do without Glyphosate and other products containing Glyphosate. All of EU does without Glyphosate. Why can’t Sri Lanka ?
State LAND can also be leased out to local people to carry out Green Energy Projects as well as Green mid size & small enterprises. We do not want the International Corporate style (money first, money only) of enterprises in Sri Lanka. Glyphosate came from such an enterprise.
The rampant profit motive is a killer.
Reasonable profits can be made by the entrepreneur, with health of the nation & the world in mind.
PATRIOTISM a must in businesses in Lanka.
July 12th, 2017 at 3:16 pm
Kamalika, Thank you very much for writing extensively on this important topic.
There is a myth that has been propagated that PURE Capitalism works. It DOES NOT. In the USA which is the epitome of the PURE capitalist economy, look at the factual situation. How many major Financial Depressions has that country gone through with the massive loss of jobs each time for very large numbers of people. It worked for a short while from 1944 onwards when Pres Franklin Roosevelt brought in the New Deal for the people. One of the main points of this period was the very high tax rate for the very higher incomes reaching up to 91%. During this time the workers were unionized and got very good wages. This was a Golden Era for the USA since it was a socialist economy. It was truly great. The University Education was covered by Pell Grants which made it virtually free. People had a lot of money in hand and were spending it thereby creating a vibrant economy. In 1980 Ronal Reagan the actor was elected as President and he brought in a number of changes which destroyed this financial greatness of America. He disconnected the US dollar from the Gold Standard and cut taxes for the rich from the 90% to 35%. He also began to dismantle most of the welfare programs for the people. This has been a Republican mantra since then and each Republican President kept cutting taxes and also cutting the welfare projects. The present govt appears to be planning to outdo all the others in removing the Social Safety net. Unfortunately the Corporate media especially Fox News keep plugging this lie that cutting taxes stimulates the economy. When George Bush cut taxes while fighting two wars in the Middle East he drove the economy into a Recession. Pres Obama had to work very hard to bail out the economy and it was the taxpayers who had to pay the losses of the too-big-to-fail big banks. When Pres Obama resurrected the Chrysler and GM factories which were crashing, the Republicans were telling him to let them fail. It would have thrown millions out of work. Now the USA prints any amount of Dollars they need and to keep the value up they have made sure the Middle East sell all the oil in US Dollars. It was the same reason Gaddafi was killed because he was going to sell oil for Gold Dinars (backed by Gold). Even MR brought in the Chinese Yuan as a reserve currency which was his undoing. If this situation changes as many economists have pointed out then the US Dollar will crash.
In terms of PQLI, the USA is way below countries in Europe which follow Socialist Economies. Almost all the people carry guns and there are many people who have no insurance for health. When they fall ill they go to emergency who treat them. The Pharmaceutical Companies are gouging the people which is allowed by the Congress who benefit in terms of contributions from them. The environment has been degraded and the present Government has removed all the restraints the Obama administration had placed on Corporations to dump waste. About 0.1% of the people have most of the wealth of the country. A large number of people have no savings in their old age and are in very sorry states. Is this what we want for Sri Lanka or should we like Bhutan measure the success of the economy by Gross Domestic Happiness?
When the Batalanda Commission had recommended RW’s civic rights be removed how is he now the Prime Minister? It is only because he is a puppet of powerful countries and is supported by them. He lost elections 29 times, then tried to come to power behind Sarath Fonseka and finally managed to come through My3 who appointed him illegally has the Prime Minister in Jan 8’15. When he was appointed illegally My3 stated that the West wants him as the Prime Minister.
President Mahinda Rajapaksa was trying to go on the path of Self-Sufficiency as you suggest. He had to spend money on the infrastructure since it had been destroyed and neglected for 30 years by the old hag CBK and Ponil. As soon as MR came into power he started projects to develop the infrastructure. In 2009 when he eliminated LTTE and their leader the West was livid. They send the French Foreign Minister Boucher and David Miliband Leader of the opposition in U.K. Parliament to beg for Prabhakaran’s life from MR. President Mahinda Rajapaksa stood firm and as a result, they started their plans to eliminate him. Funds were given to the opposition to mount a campaign to besmirch MR’s character and drag him to the ground. In spite of it MR would have won if there was no large-scale cheating by the opposition.
During the last two years from Jan 2015, the මූසල ආණ්ඩුව has taken more loans than MR did in his time from 2005 to 2009. But what do they have to show for it? They go around opening buildings and hospitals etc that MR had built and they put their own name plate on the buildings after removing MR’s name. The only thing they have done with the money is to import luxury BMWS, Mercedes Bezes and Range Rovers for the corrupt parliamentarians. The bond scam engineered by Ponil and Arjun Mahendran is one of the biggest insider trading jobs in the world.
Self Sufficiency would have given our people Dignity, Peace, and Prosperity. The farmers would have been self-employed and would have supplied the rice we needed. We could have had small-scale private operations to produce various other goods as you suggest. The Yahapalanaya killed the fertilizer subsidy to destroy the farmers. Now that Wikunanasinghe wants to convert us into an export economy as per the instructions from the IMF. They feel the time is right for the takeover of Sri Lanka by Multinational Corporations and the wealthy Tamil Diaspora. They will come and buy everything from the Trincomalee harbor, Hambantota harbors our best lands and convert the people to serfs who will have to work under these Corporations. Instead of being a dignified race of people who are self-sufficient, we will end up as serfs working for a pittance for these corporations. Wikunanasinghe and his cohorts will be very well looked after. Sri Lanka labor costs are much higher than that in India, Bangladesh etc. So these corporations will import labor who will never go back and what happened in 1815 will be repeated. The ethnic balance will be changed Furthermore forever. Both CBK and Ponil will have their ultimate revenge. Ponil is a twit who mind is still in the 1950’s mindset. He thinks Capitalism works. It does not as has been shown by one of the world’s foremost Economists Dr. Richard Wolf and many others.
RW follows the script from failed pure capitalist ideas from the International powers. Most of Europe including U.K follow Socialist Systems of Governance. RW after losing elections 29 times keeps coming like the Terminator in the film. Both Ranil and CBK are like the walking dead in the film Zombies since their hearts are dead. The body and head keep going on a set program from the International powers.
We need to measure the success of the economy by PQLI (Physical Quality of Life Index which is a composite number to measure Life expectancy, literacy, infant mortality etc). Not by GDP. The only solution is for all the good well-meaning people in the country, the intellectuals, the workers, the priests and the forces to rise up against this life defeating systems and bring lasting change and prosperity for the ordinary people not the few at the top.
Sri Lanka is the Socialist Republic. Not a Capitalist Paradise for vermin from abroad to creep in and spoil our land and culture. The purely Capitalist countries have destroyed their countries and parts of the world and are now looking for new fresh lands to conquer and plunder and rape.
There are many top economists who have written on the topic. One of the most outspoken has been Dr. Richard Wolf. His famous talk Capitalism hits the fan is given below. His solution for capitalism is to have democracy in the workplace. The Mondragon Corporation in Spain is actually a large number of Co-operatives under the umbrella of Mondragon. This was set up with the blessings of the Catholic Church. In the USA there are many companies which are run as co-operatives where the employees participate in the decision making of the company affairs by being on the board. In Germany which has been very successful any company with over 2000 employees have to have at least 50% of employees on the board. This is why unlike USA Germany is very successful. In 2008 when the recession hit many companies in the USA laid off people in millions. In Germany, the Govt informed the companies not to lay off anyone. They suggested that they can reduce the number of hours of employees but keep all employed. In return, the German Govt paid the wages of the companies who had reduced the number of hours of employees so that no one lost any money. The net result was that the people had money in the pocket and were spending it thereby keeping the economy rolling. They hardly felt the recession, unlike the stupid USA.
Please watch https://www.youtube.com/watch?v=TZU3wfjtIJY ( Capitalism Hits the Fan – Richard Wolff)
https://www.youtube.com/watch?v=_WhZXhRS3F4 ( Austerity and Neoliberalism in Greece with Richard Wolff and Barry Herman | The New School)