{"id":92709,"date":"2019-08-30T15:33:14","date_gmt":"2019-08-30T22:33:14","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=92709"},"modified":"2019-09-12T15:59:40","modified_gmt":"2019-09-12T22:59:40","slug":"yahapalana-and-the-economy-part-15","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2019\/08\/30\/yahapalana-and-the-economy-part-15\/","title":{"rendered":"YAHAPALANA AND THE ECONOMY Part 15"},"content":{"rendered":"

KAMALIKA PIERIS<\/em><\/span><\/h2>\n\n\n

Revised\n9.9.19<\/strong><\/p>\n\n\n\n

BUDGET 2019<\/strong><\/p>\n\n\n\n

The Parliamentary Committee on Public Finance in its report on the\nfiscal, financial and economic assumptions of the Budget for 2019 has issued a\ndamning indictment of the Ministry of Finance stating that the MoF had\ndeliberately misled Parliament. The Committee has asked the Central Bank to\nformally assess the adequacy and validity of the assumptions framework of the\ncurrent budget and to report to Parliament, because there were doubts about the\nvalidity of the figures provided by the Ministry of Finance. <\/p>\n\n\n\n

One example given by the CoPF is the manner in which the revenues\nfrom the Betting & Gaming Levy are reported in the budget which led\nParliament to be misled on the fiscal consequences of the policy change. The\nambiguous term \u2018revised\u2019 is consistently used while failing to specify that\nsome revisions are tax increases, and others tax decreases.<\/p>\n\n\n\n

The Budget Speech announced the revision of the license fee of\ncasinos to Rs. 400 million per annum in a situation where the present rate was\nRs. 200 million. This was a tax increase. A revision of the Betting and Gaming\nLevy on Rudjino games to Rs. 1,000,000 per annum was announced in a situation\nwhere the present levy was Rs. 200 million per annum – which represents a\ndrastic tax reduction. The casino entrance fee was revised to USD 50 per\nperson, in a situation where the present entrance fee was USD 100 per person\nthe revision thus representing a halving of the existing tax. But due to the\nuse of the ambiguous word \u2018revision\u2019 Parliament had no way of knowing whether\nthe tax was going up or down. Measures that reduce collectable revenue are\npresented to Parliament as measures that will achieve precisely the opposite.<\/p>\n\n\n\n

The reduction in the Betting and Gaming Levy charged from Rujino\ncentres from 200 million to Rs. one million has been presented as an increase\nof Rs. 10 million in tax revenue. There are four casinos and ten Rudjino\ncentres and the Rs. one million tax has been presented as an estimated increase\nof Rs. 10 million in the year 2019 instead of presenting it as a revenue loss\nof Rs. 1,990 million) in 2019. <\/p>\n\n\n\n

The Parliamentary Committee on Public Finance said that the way\nthe Budget is presented is so vague that reductions in the Levy are presented\nas an increase and then Parliament is then misled even more by the Budget\nEstimates that present the consequence of these reductions as revenue enhancing\nrather than revenue decreasing measures!<\/p>\n\n\n\n

There is a mismatch between the Budget Speech and the Budget\nestimates with regard to the expected increase in revenue due to revisions in\nthe NBT tax. The budget speech mentions a positive impact of Rs. 5 billion in\nrevenue gain from NBT changes. However, the budget estimates envisages a\nfurther Rs. 13.9 billion increase in revenue from NBT during 2019. This\nincrease does not match with the information and assumptions provided with\nregard to changes in policy and resulting gain and loss in revenue. <\/p>\n\n\n\n

EXCHANGE\nCONTROL ACT OF 2017<\/strong><\/p>\n\n\n\n

Yahapalana replaced the old Exchange Control Act with a new one,\nthe Foreign Exchange Act, No. 12 of 2017. \nThe Act was drafted without consulting the Central Bank and their\nopinions were sought only after the Gazette was published. Central Bank said\nthat the Act was not drafted by   the\nCentral Bank. We were not included. It was done outside .We were actually very\nupset about it, said Central Bank Governor, Coomaraswamy.\u2019  We were asked to comment on it. <\/p>\n\n\n\n

Analysts said that the new Act was weaker than the previous one.\nUnder the new Act, any person can deal in foreign exchange for their\ntransactions without any Exchange Control restrictions. Further, the new law\nremoved criminalization of violations of the Exchange Control Act and prison\nsentences.  There were loopholes.  The Act does not interpret what it means by\n\u2019wrong\u2019.<\/em> Those who had aided and\nabetted the transactions listed in Panama Papers expos\u00e9 were able to evade\nlegal action due to this.  <\/p>\n\n\n\n

The Act   weakened the CBSL\u2019s regulatory role with\nregard to illegal transactions. \nUnauthorized money transactions were taking place all over the country.\nForeign currencies are kept illegally. Transactions do not come into official\nbanking system, the Central Bank complained. . Central Bank cannot initiate\ninvestigations on transactions prior to November 2017, either since the old\nExchange Control Act was rescinded and replaced. <\/p>\n\n\n\n

Central Bank was speaking about the Batticaloa Campus. Under the\npresent Exchange Control Act, there were no provisions to institute legal\naction on individuals for transactions that were made for the Batticaloa Campus.\nWe cannot enforce the law against transactions over the Batticaloa campus\nsince the Penal Code demands that there ought to be an offence, however under\nthe new Exchange Control Act, offences are loosely defined,\u201d he said. . <\/p>\n\n\n\n

PEOPLE\u2019S\nBANK (AMENDMENT) BILL<\/strong><\/p>\n\n\n\n

The People\u2019s Bank (Amendment) Bill was presented by the Minister\nof Finance on 24th<\/sup> May 2019 to Parliament. This Amendment is about raising\ncapital for the Peoples Bank, by issue of debentures. The bank will be given\nthe freedom to issue debentures up to Rs.50 billion to increase its\ncapital.  <\/p>\n\n\n\n

 This amendment seeks to\nreplace section 20 of the Act which says that debentures can be issued only\nwith the approval of the Ministry of Finance given after consultation with the Monetary\nBoard of the CBSL. The Bank authorities will have the full power to\ndecide on debentures without any the intervention of MOF and Monetary Board.Why is it necessary for the bank\nto have complete freedom for this. Why\ngrant  a license to the Bank Authorities\nto freely decide the supplementing of any sum of funds through\ndebentures asked critics. <\/p>\n\n\n\n

The need to provide a compulsory guarantee by the Minister of\nFinance  on account of the repayment of\nany sum due on debentures issued by the Bank is to be repealed. Future issue of debentures by the bank would\nnot be guaranteed by the government either.  Critics\nfear that this will lead to privatization of the Bank. The definition of\nshareholders as per the section 13 of People\u2019s Bank Act is to be changed. The\nprivate sector  may through this get a\nstake in the bank through debenture issues. This could lead to the\nprivatization of the bank.<\/p>\n\n\n\n

MONEY  SUPPLY<\/strong><\/p>\n\n\n\n

In January\n2017, the media reported that Government has printed tens of billions of rupees\nin one of the largest volumes of Central Bank credit in a single day. On Jan\n2,  the net excess liquidity in the\nbanking system shot up by 68 billion to 89 billion indicate that a massive\nvolume of money had been printed and let loose, \nsaid critics. It is said that this was done at the order of the \u2018fiscal\nauthorities\u2019 , which means this is the first time that we see fiscal dominance\nof monetary policy. (\u2018Fiscal \u2018 refers to taxation, public spending, debt, and\nfinance while ‘monetary’ relates to money and how it is supplied to, and\ncirculates in, an economy.)  There is\nrising concern about the recent fiscal dominance of monetary policy and\nattempts to undermine the independence of the Central Bank.. This will\nadversely affect the economy. <\/p>\n\n\n\n

NEW\nEMPLOYMENT LAW<\/strong><\/p>\n\n\n\n

In July 2019\nit was reported  that   Yahapalana  was planning a new unified employment law that\nwould replace 54 labour legislations currently in force. The Wages\nBoard Ordinance No.27 of 1941, the Factories Ordinance No.45 of 1942, Shop and\nOffice Employees Act No.19 of 1954, Maternity Benefit Ordinance, and Factories\nOrdinance will be revised and combined into a single employment law.<\/p>\n\n\n\n

Wages Boards\nare to be scrapped giving the employer the right to decide on minimum wage\nirrespective of the trade or industry, This proposed law is intended to give\nthe employer the legal right to decide all terms and conditions of employment\nin the private sector. .A working day to be not more than 12 hours in a 45 hour\nwork-week that allows employer to limit work to four working days with no wages\nfor the other three days including Sunday. Gratuity for workers have also been\nseverely restricted and the Termination Act No. 45 of 1971 is to be repealed\nallowing the employer to dismiss workers as the employer wish, perhaps even\nwithout any disciplinary inquiry. <\/p>\n\n\n\n

The\ndraft  law which is yet to be made\npublic, was presented to the National Labour Advisory Council (NLAC) without\npermitting discussions. The draft was prepared under USAID supervision by\nprivate legal consultants..All member trade unions in the NLAC have opposed\nthis effort in devising a new single labour law\u201d with direct USAID assistance.\n<\/p>\n\n\n\n

GAS\nAND OIL EXPLORATION<\/strong><\/p>\n\n\n\n

Natural gas\nand oil excavations will begin next year and hopefully, the country would start\nproducing them by 2022 said Yahapalana   Explorations\nat the Dorado and Barracuda (M1 and M2) blocks in the Mannar basin have\nprogressed steadily. Proposals were now being evaluated to select a suitable\nparty to award the tender to develop them.<\/p>\n\n\n\n

The\ngovernment  has amended its agreement\nsigned in 2016 with the French oil and gas super-major \u2018Total E&P\u2019 to\ninclude the Norwegian oil and gas company \u2018Equinor ASA\u2019 as a joint study\npartner to explore the hydrocarbon potential in the JS-5 and JS-6 blocks of the\nLanka Basin in the eastern offshore region. In 2018, two joint study blocks,\ncovering over 50,000 square-kilometres, saw the largest ever 2D seismic survey\ncarried out in Sri Lanka, where 5,000 line kms were acquired. It was the\nfirst-ever detailed 2D seismic survey to be carried out in the Lanka Basin. The\ndata from this seismic survey revealed the two blocks to have a significant\nhydrocarbon potential, and as a result, Total E&P decided to move forward\nto the next phase of exploration with Equinor ASA as a joint study partner,\u201d<\/p>\n\n\n\n

WASTE IMPORTS<\/strong><\/p>\n\n\n\n

There are  over 1,000\nunclaimed  containers at the Colombo Port\nand most of them are believed to contain hazardous waste from other countries,\naccording to environmentalists. This shows that Sri Lanka is already in waist\ndeep trash trouble with no system to track the waste trade, they said. <\/p>\n\n\n\n

Banned waste categories are \nfreely being imported to Sri Lanka \nunder the final FT agreement with Singapore.” Said critics. \nSri Lanka- Singapore Free Trade Agreement was \npaving the way for more hazardous foreign waste being imported here.<\/p>\n\n\n\n

There are various types of waste in both Sri Lanka and Singapore\nlists. This includes Waste straw, Ash and residues from the incineration of\nmunicipal waste, Waste and scrap of rare-earth metals, Waste pharmaceuticals,\nMunicipal waste, Sewage sludge, Clinical waste, Scrap and waste of Micro\ncellular, paper\/paper board, including unsorted waste and scrap, Building\nblocks and bricks-concrete cement blocks encasing industrial waste sludge,\nConcrete cement blocks encasing industrial waste sludge, Waste and scrap\ncontaining lithium-tantalum and lithium niobium, Nickel waste and scrap, Lead\nwaste and scrap, Waste and scrap, Waste and scrap of cobalt etc. <\/p>\n\n\n\n

 There are many other types\nof waste included in Sri Lanka list  which are free of custom duties. Some are\nharmful to the environment and some are not. Since China stopped receiving\nforeign waste for recycling, western waste traders have sent their waste to\nASEAN countries.  Since ASEAN countries\nare closing the loopholes, Sri Lanka, Pakistan, India and Bangladesh seems the\nnew targets. <\/p>\n\n\n\n

**&<\/p>\n\n\n\n

COWS FROM\nAUSTRALIA.<\/strong><\/p>\n\n\n\n

The Presidential Commission of Inquiry investigating\nCorruption in the current Administration was informed,  that   t<\/em>he government had in 2017,\ndistributed 3,030 substandard , \nsick,  highly infectious  imported Australian cows among 46 investors\nand dairy farmers who took part in a subsidized scheme to introduce\nhigh-yielding imported pregnant cows. The Ministry of Rural Economy has\ninformed the investors that those pregnant cows would produce 20 litres of milk\na day on average and advised them to get rid of the local cows on their farms..<\/p>\n\n\n\n

Presidential Commission of Inquiry investigating corruption in the\ncurrent administration was told  of this\nmatter. Minister of Rural Economic Affairs, had informed the Cabinet through a\nmemo on March 24, 2017, that they had paid a 20% advance to Wellard Rural\nExports Pvt., to import milch cows. The Commission was informed however, that there\nwas no such clause in the agreement signed between the two parties,. Commission was also  told that the payment had been made a day\nbefore the Cabinet paper was presented. \nUSD 924 000 was paid to Wellard. <\/p>\n\n\n\n

The issue of the milch cow import scheme had been discussed when\nthe 2018 Budget was prepared. However, the Treasury didn\u2019t allocate any budget\nbecause there had already been complaints against the quality of the imported\ncows.” Despite this,  Sri Lanka had\npaid Rs. 1.3 billion (USD 8.3 million) to Wellard Rural Exports Pvt. Ltd, on\nMay 08, 2018, as an advance payment to import 15,000 milch cows. ” The\nmoney had been loaned from Rabo Bank, in the Netherlands. The money was\nchanneled through the External Resources Department of the Treasury. .”\nWhile we are saddled with a loan, Wellard has got USD 8.3 million for free.\n.” Almost 16 months have passed since the payment, Wellard hasn\u2019t sent us\na single cow, the Department said..”<\/p>\n\n\n\n

The internal auditor \nassigned to the project informed the Commission that information about\nthe agreement, the implementation and the MoU signed with Rabo Bank of the\nNetherlands was extremely difficult to obtain.<\/p>\n\n\n\n

.Only a few people were privy to the information and whenever I\nasked for it the people who handled it said they had to ask Wellard. Until I\nwrote to the internal auditor and the Auditor General no one outside knew about\nwhat\u2019s going on,  he said.” Project\nmanager didn\u2019t provide the information the internal audit asked for, to\ncommence the audit. They didn\u2019t even provide information to the external\nauditors.” <\/p>\n\n\n\n

However, a senior Finance Ministry spokesman strongly defended the\ntransaction. He said the legality of the transaction couldn\u2019t be challenged. According\nto him, a milch cow worth about Rs 450,000 was made available to local farmers\nat Rs 150,000 with the price difference being absorbed by a government subsidy.\n<\/p>\n\n\n\n

As the\ninquiry progressed, further information emerged. Chief Auditor of the Rural\nEconomic Development Ministry said that the Ministry carried out an audit\ninquiry after the first shipment of cows. As a part of the audit they had\ninspected some of the farms. They found many irregularities. <\/p>\n\n\n\n

 The director of the project (name withheld) told\nus that 20 cows were given to Devinda Farm at 28 Gannoruwa Road, Peradeniya.\nBut there was no such farm at that address, only a building that belonged to\nthe Livestock Development Board. The Director had then said that the owner of\nthe farm Professor Basil Alexander had given the cows to Hingurana Dairy farm\nin Matale on July 2017 after villagers protested against the farm, having\nobtained permission from the Ministry to do so. However auditors found no\ndocument to prove that Alexander had obtained the approval of the Ministry. <\/p>\n\n\n\n

The\nCommission probed further. When the auditors went to the farm did they see any\ncow sheds there? Answer, no. The Presidential Commission decided that there was\nsomething fishy about this project. The information provided by Director of the\nproject was false and instructed the CID unit attached to the Commission to\ninvestigate the matter. (Island 29.8.19 p 4) <\/p>\n\n\n\n

The Presidential Commission of Inquiry found  that number of large scale farms had\nbenefited from a subsidised scheme to import milch cows aimed at helping small\ndairy farmers.,a number of big names in the dairy industry had obtained over\n1,000 cows under the scheme.  <\/p>\n\n\n\n

The auditors said there were also a number of mismatches in the\nagreement with the farmers. “For example a cow was priced at Rs. 467,950.\nThe beneficiary had to pay Rs. 200 000. The government pays Rs. 200 000. But it\nwas not mentioned who would pay the balance amounting to Rs. 67,950. very\nlittle help had been extended to the audit by the project team. “They\nwent out of their way to make things difficult for internal auditors. <\/p>\n\n\n\n

SAMURDHI<\/strong><\/p>\n\n\n\n

  • Chief Opposition Whip told Parliament\nthat the government had spent Rs. 400 million on advertising a project to grant\nSamurdhi benefits to 600,000 more persons.<\/li>
  • Samurdhi recipients  have complained about Samurdhi. They\ndemonstrated at  Ampara in June 2019,\nwaving documents showing that those who needed Samurdhi were not getting it,\nbut those who had three wheelers and lorries were<\/li>
  • In June 2019, there was a demonstration in Battaramulla,\nagainst  the government\u2019s move to take Samurdhi\nfunds for its programmes. Those who demonstrated belonged to the all Ceylon\nSamurdhi development and Agrarians assistant officers Association.<\/li>
  • In a media release in 2019, Mahinda  Rajapaksa said: spending money for the New\nYear and Christmas is being released from the compulsory savings of Samurdhi\nrecipients in 2019 when such a thing never happened in previous years. After releasing Rs. 30,000 in a single year,\nit is obvious that there will no money to be released in that manner in the\ncoming years. The purpose of having\ncompulsory savings for Samurdhi recipients is to encourage the savings habit\nand to enable them to utilize that money for self-employment and other livelihood\nrelated activities. We have not heard of the compulsory savings of Samurdhi\nrecipients being released as spending money for festivals. <\/li><\/ul>\n\n\n\n

    THE CCEM\u201d<\/strong><\/p>\n\n\n\n

    Economic policy   under  Yahapalana was decided by a specially created\ncommittee, Cabinet Committee on Economic Management (CCEM) CCEM  was established following a Cabinet decision\non September 23, 2015.  Projects were\nfirst presented to the CCEM and then to Cabinet. The Asian Development Bank\nmade a presentation to the CCEM on a National Ports Master Plan. It was only\nthereafter, the ADB was advised to meet the Minister of Ports and Shipping for\ndetailed discussions. A vehicle importer had imported 24 used commercial\nvehicles in December after the budget proposals in November last year. The\nCustoms refused to accept the duty payments. The company suffered heavy\ndemurrage costs. The CCEM decided to recommend to the Cabinet to waive the\ndemurrage. The CCEM was scrapped and its functions absorbed by the cabinet in\n2018. Other subjects ranged from discussing grievances and offering redress. A\nvehicle importer had imported 24 used commercial vehicles in December after the\nbudget proposals in November last year. The Customs refused to accept the duty\npayments. The company suffered heavy demurrage costs. The CCEM decided to\nrecommend to the Cabinet to waive the demurrage. Yet another was how the\nMinistry of Housing and Construction was asked to submit to the CCEM a draft\npolicy on High Rise Buildings. <\/p>\n\n\n\n

    GSP\nPLUS<\/strong><\/p>\n\n\n\n

    IN 2016 it\nwas observed that In its haste to regain the GSP Plus facility, the Ministry of\nForeign Affairs has agreed with the European Union (EU) to implement a\nsprawling list of 58 conditions linking human rights, national security and\nother domestic concerns with trade, a document obtained by the Sunday Times\nshows. <\/p>\n\n\n\n

    Among the 58\nconditions imposed are to revoke the Prevention of Terrorism Act, to expedite\ncases of remaining detainees, to introduce a new Human Rights Action Plan,\nreview the status of the Tamil Diaspora organizations and individuals on the\nterrorist list, to devolve power under the new Constitution, return all private\nlands to owners in the North, adopt a policy of National Reconciliation and on\nNational Resettlement, finalize the re-settlement of all displaced persons, and\nto ratify the Convention on Enforced Disappearances with accompanying\nlegislation as well as issue certificates of absence. <\/p>\n\n\n\n

    The\nGovernment has committed to rehabilitate all ex-combatants by 2017 and to amend\nthe Code of Criminal Procedure to include the rights of detainees by 2016. It\nhas been agreed to adopt new regulations for public disorder management by the\npolice by the end of March 2016; review the Public Security Ordinance; expedite\nthe processing of remaining cases referred to by the UN Working Group on Enforced\nor Involuntary Disappearances; and to establish an office on Missing Persons. <\/p>\n\n\n\n

    The\nGovernment has agreed to security sector reform\u201d; to put an end to all\nsurveillance, harassment and reprisals against civil society, human rights\ndefenders and journalists\u201d; propose legislation allowing individuals to submit\ncomplaints to the UN Human Rights Committee under the First Optional Protocol\nto the ICCPR and to the UN Committee against Torture; and to reconsider the\ndecision to establish the Press Council\u201d. <\/p>\n\n\n\n

    The list also\nincludes an undertaking to propose legislative changes to ensure\nnon-discrimination on the basis of sexual orientation; to expedite prosecution\nof reported cases of torture; to launch wide public consultation and to\ndisseminate information during the various stages of setting up a transitional\njustice mechanism; and to design a transitional justice architecture consistent\nwith the Human Rights Council resolution and the results of the public\nconsultation. <\/p>\n\n\n\n

    The EU\ninsisted that the conditions be met before Sri Lanka can even consider applying\nfor the GSP Plus. The stringent stipulations came with short deadlines and were\naccepted by the Foreign Ministry without any form of negotiations\u201d at the\nEU-Sri Lanka Working Group on Governance, Rule of Law and Human Rights in\nJanuary 2016 <\/p>\n\n\n\n

    Critics\nobserved that given our middle income status, Sri Lanka is eligible for the GSP\nPlus only for a few more years. There are doubts about the EU now, reported\nTIME in April 2019. Greece, Ireland, Portugal and Spain were virtually bankrupt\nand entirely dependent on bailouts from the IMF, and Germany after the\nrecession. The loans given by the EU imposed severe austerity measure that\nsqueezed ordinary citizen and cut public services.  There should be a limit to the EU’s mammoth\nscope and regulatory oversight.   ( CONCLUDED) <\/p>\n","protected":false},"excerpt":{"rendered":"

    KAMALIKA PIERIS Revised 9.9.19 BUDGET 2019 The Parliamentary Committee on Public Finance in its report on the fiscal, financial and economic assumptions of the Budget for 2019 has issued a damning indictment of the Ministry of Finance stating that the MoF had deliberately misled Parliament. The Committee has asked the Central Bank to formally assess […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[104],"tags":[],"class_list":["post-92709","post","type-post","status-publish","format-standard","hentry","category-kamalika-pieris"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/92709","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=92709"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/92709\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=92709"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=92709"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=92709"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}