Waste of Foreign Exchange Importing Luxury Cars
Posted on August 14th, 2017

by Elmo de Silva Courtesy The Island

August 5, 2017, 6:35 pm

I retired from the S.L.A.S after serving in several Departments, Ministries and in several districts. I served in the World Customs Organization (W.C.O ) in Brussels , Belgium for five years, promoting an International Convention on the Simplification and Harmonization of Customs Procedures. After this I worked in the Private Sector for nearly 10 years. When I served as Dy. Controller Import and Exports I was responsible for the disbursement of Forex, except that needed for local industries. My work at Customs as Dy. Director General Customs and at the W.C.O. took me to 22 countries, where I have observed Customs, port operations etc. Just to cite one example of my work in Sri Lanka , I co-ordinated the opening of the stage two Kaudulla wewa project, in the Polonnaruwa district, which made available 5,000 acres for cultivation .

There is a waste of Forex which is beyond my understanding and is a threat to the Countries’ economic and political stability. A trend commenced by the previous Regime has been accelerated by the present one. I have requested information from the Central Bank regarding the amount of Forex expended for the import of cars, by Sri Lanka in 2016 and the first half of 2017. I have had no reply. I intend demanding this information under the Right to Information Act.

It is my view that over three billion U.S. Dollars are expended on the import of vehicles, most of which are luxury vehicles. One example as I have being informed, is the import of 1,600 B.M.W cars where each car costs U.S.$ 42,000, which amounts to a total of U.S.$ 70 million. This is in addition to the uncontrolled import of other luxury cars such as Benz, Audi, Volvo, Jaguar, Prado and even Rolls Royce cars. It is on this basis that I estimate that nearly three billion U.S. $ are spent on the import of luxury cars. In the twenty two countries I have been to, including many countries in Europe , I have not seen so many luxury cars on the roads. To this should be added the large entourages of politicians attending at times, unnecessary conferences etc . Mr.Modi the Indian P.M. travels alone. His visit to S.L was 151 days after his last trip abroad. Mr Ronnie de Mel always attended meetings at the I.M.F , World Bank etc alone, as he knew all the data relating to Foreign Aid Projects and needed no assistance. Besides people travel frequently, other than for health or business purposes. The Island News paper reported that over 100,000 have travelled to Singapore this year. All this means large commitments on the country’s Forex.

FOREIGN EXCHANGE IS NOT BUDGETED NOR AUDITED, and there is therefore no fiscal control. There is a need to exercise very strict control on our Forex expenditure. During the Govt. of Mrs. Bandaranaike the country had a shortage of rice and there was no Forex to import the rice. Pakistan loaned/gifted the rice. I know this as I disbursed Forex in my capacity as Dy. Contrller Imports and Exports ( 1970 to 1975 )

What has being stated above is to point out that there is no need to lease out ports to other countries if our Forex expenditure is properly managed. I have not heard of any country leasing out ports to foreign countries. Most countries borrow for development purposes. If the S.L. govt had borrowed funds and find it difficult to pay this off, the payment instalments could be rescheduled and the amount of each instalment could be substantially reduced. I am of the view that the assistance of the Chinese Government could be sought in this regard. If the sacrilegious waste of Forex is curtailed our foreign debts could be paid with ease.

On the question of the countries foreign debt, every country borrows money especially for infrastructure projects. Our Debt to G.D.P. ratio is 76% ,while that of the U.S.A. is 102%.The U.S.A has issued sovereign bonds up to U.S.$ 4 trillion to China and 3 trillion U.S.$ to Japan.

Regarding I.M.F. standby credit, Sri Lanka has being offered USD 1.5 billion in three tranches. Compare this with the nearly U.S.$ 3 billion expended only on the import of luxury cars. Greece was given an I.M.F. credit of U.S.$ 360 billion, Egypt U.S.$ 12 billion and even Mongolia U.S.$ 5 billion.

All these luxury cars are imported whilst people are struggling to MERELY EXIST. This is injustice of the highest order.70% of the Forex expended on luxury car imports is earned by our maids in the Middle East , who undergo torture. I have being told of this by a maid who works for me and has worked in the Middle East . Her sister who yet works in the Middle East, and is fluent in English, Arabic , Sinhalese and Tamil, rescues the maids who are ill treated and houses them in a church pending they obtaining their documents to return to Sri Lanka . Forex is also earned by girls in the garment industry who are worked to the bone . When I visited the L.M.K. Browns garment industry in Katunayake, some time back, the girls who worked there (I was told by the mangement) fainted at about 10 a.m. because they could not afford to have their breakfast. Subsequently when I visited this factory with the then Minister of Finance, Mr. Ronnie de Mel he stated that when he goes abroad, he is ashamed to speak about the very low salaries we pay these workers. This is why there are nearly 15,000 vacancies in the B.O.I. Zones. Then there are the tea estate workers who toil daily to pluck tea for a pittance; and when the final product is exported, the Forex earned is wasted on the Import of luxury cars.

As for Govt Revenue, 300 duty free cars have been imported with a loss of Rs. 33 million on each car. On the import of the B.M.W. cars the value of these cars are under valued by U.S. $. 12 million (real price U.S.$ 42 million undervalued price U.S.$ 30 million) to satisfy the import permit conditions. Besides, apart from corruption in the Customs the Inland Revenue Dept. is as corrupt. I know this as I worked in the Private sector. To obtain a refund of accumulated Turnover tax of Rs. 120 million the I.R.D. officers had to be paid Rs. 5 million. There are other instances too. Why are all those who import luxury cars and build massive houses or high rise buildings not taxed? IN THIS COUNTRY THE RICH ARE SUBSIDIZED (EXEMPTION OR REDUCED CUSTOMS DUTIES, TAX EXEMPTIONS OR TAX EVASION) AND THE POOR ARE TAXED (INDIRECT TAXES).

Besides why should public servants or any others be permitted to import cars, sell these after five years and repeat this every five years. When I joined the public service we were given a Treasury loan, which had to be paid back in instalments. The car could be used for official work and payment was made for the cost incurred. Later, President Premadasa allowed heads of Ministries or Departments to pay a nominal price and own the car on retirement.

I gather from news reports that the debt incurred on construction of the H’tota port is U.S.$ 1.1 billion. If our forex is sensibly managed and the debt rescheduled, this debt could be easily paid off, without taking the proposed action, which amounts to a virtual sell off the H’tota Port. THE RECKLESS OBSESSION WITH CAR IMPORTS DEFIES ONE’S UNDERSTANDING.

It is also observed that there is no progress in the development of agriculture, Industry, international trade , infrastructure etc. If rice production could be doubled in the acreage now under cultivation much Forex could be earned if rice is exported. This is easily attainable. When I worked in the Hambantota district as D.L.O, while the farmers on land given by the Govt. produced about 25 bushels per acre the adjoining privately owed Jayawickrema yaya produced about 100 bushels per acre, as superior agricultural practices were employed.

Let me end this by saying that as a senior public servant and as a senior citizen with a great deal of experience that I am very perturbed regarding the present economic position in S.L. The Government appears not to be receiving the correct advice, as all seem to be “YES MEN”. I have tried to make this note as brief as possible.

I do not prescribe to any political party or government, but what I state is only in the National Interest. I am not an economist, but as I tell my friends I have one degree in geography from the Peradeniya University and another degree from the University of Experience .

2 Responses to “Waste of Foreign Exchange Importing Luxury Cars”

  1. RohanJay Says:

    If you notice this importing of Foreign luxury cars happened after the war was won in May 2009. That is because following Mahinda Rajapakshas plea if you remember soon after the war was won for Sri Lankans who had immigrated to the west to countries like United States, Canada, UK, Europe, Australia and New Zealand etc in the 1960s, 1970s and 1980s and 1990s had done very well in the west over the last few decades starting with very little. Many had achieved middle class and millionaire and multi millionaire status in the west. Mahinda Rajapakshas brother himself was living in a comfortable well off middle class life in Los Angeles, California before moving back to Sri Lanka in 2006 following the victory of his brother Mahinda Rajapaksha to the leadership of Sri Lanka October 2005. A great many of them decided to take up Mahinda Rajapakshas request to return from western countries bringing their millions in assets etc along with them. A great many did during the peaceful years of 2009-2015 of the MR regime.
    So to facilitate the big movement of the Sri Lankan nuovo riche from the west in 2009. MR opened up the markets so that the wealthy lankans who moved back could buy the luxury items in Sri Lanka that would have bought if they continued to live in the west.

    Note I believe a good many of them have quitly moved back to the west following the ouster of MR and the generally bad governance of the new regime.
    So maybe this article should blame the importing of luxury cars to the millionaire sri lankans who moved back to Sri Lanka following peace being restored in Sri Lanka in May 2009.
    I doubt the importing of luxury cars will continue for long as this market dwindles with many of these wealthy lankans moving to the homes they had in the west before they came to Sri Lanka.
    I doubt the majority of Sri Lanka’s population unless they own and run successful islandwide businesses and the colombo 7 crowd can afford these luxury cars that are imported to Sri Lanka in the last 8 years on Sri Lankan incomes.

  2. Ananda-USA Says:

    RohanJay brings up some very good points!

    1. Indeed, upon CONCLUSION of the War, many PATRIOTIC Sri Lankan’s who believed in MR’s government brought significant assets to Sri Lanka. I was one of those people, and I had great plans to bring even more to Sri Lanka had MR’s administration continued. Instead, after Jan 8, 2015 I HALTED the transfer of all additional assets to Sri Lanka, EXCEPT those funds I needed for my extensive charitable work supporting poor rural folk and children there, who NEED that help NOW MORE THAN EVER.

    2. Indeed, I would like to travel in a large SUV in Sri Lanka just as I do in the USA, PRIMARY for SAFETY REASONS. In the USA, more than HALF the vehicles on the road are SUVS and pickup trucks. Collision with them in a small fuel-efficient car such as a Toyota Prius would sure to land you in Hospital if not the mortuary! Although US drives ae in general safer and more law abiding drivers than those in Sri Lanka, they travel at hih speeds on better roads. In Sri Lanka, the oads ae much narrower with loafs of himan and animal pedestrian traffic, and drivers generally ignore traffic rules. Therefore, a large vehicle is needed if you value your life in Sri Lanka as well as in the USA.

    I firmly CONVINCED that it is impossible to save money when you are DEAD, so the environmentally concerned energy efficiency enthusiast that I am, I ignore those flings and REFUSE TO TRAVEL IN SMALL VEHICLES in Sri Lanka just as I do in the USA.

    So, I badly need to buy a Large SUV in Sri Lanka, but is APPALLED at the high prices which are 2-3 times what I would pay in the USA for a be vehicle!

    I would like to see the Sri Lankan Govt EXEMPTING from IMPORT TAXES cars paid for with funds earned PROVABLY by expatriates in foreign lands. After all, then Sri Lanka as a country would get a vehicle without ANY DRAIN on Sri Lanka’s FOREIGN EXCHANGE or its INTERNAL ECONOMY.

    Of course, there are many ways to circumvent the rules and launder money in such a scheme, but a REASONABLE SET OF LAWS could prevent that, while ENABLING expatriates to RETURN HOME with a VEHICLE bought with FUNDS EARNED ABROAD!

    I would welcome CONSTRUCTIVE COMMENTS on this in case I AM MISSING some IMPORTANT CONSIDERATIONS. What do you think, guys?

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