Friday, 5 April 2013

Why Sri-Lanka will become Skint-Lanka in the years ahead?

Sri-Lanka has been run by utterly incompetent people since independence in 1948. The country’s economy has been run down. 

In talking of Sri Lanka, this is what the former Prime Minister of Singapore, Lee Kuan Yew says: "Sri Lanka - the Country will Never be Put Together Again.” 

“In 1965, we had 20 years of examples of failed states. So, we knew what to avoid — racial conflict, linguistic strife and religious conflict. We saw Ceylon.”

“My first visit to Sri Lanka was in April 1956 on my way to London. That same year, Solomon West Ridgeway Dias Bandaranaike won the election as leader of the new Sri Lanka Freedom Party and became prime minister.”

“He had promised to make Sinhalese the national language and Buddhism the national religion. He was a brown "pukka sahib" English-educated and born a Christian; he had decided on nativism and converted to Buddhism, and had become a champion of the Sinhalese language. It was the start of the unravelling of Ceylon.”

“Riots — we have seen in Sri Lanka, when they switched from English to Sinhala and disenfranchised the Tamils and so strife ever after.

“Sri-Lanka has failed because it had weak or wrong leaders.”

World’s Largest Cabinet

The country has the largest cabinet in the world with more than 90 Ministers. But the Rajapaksa brothers control more than 80% of the budget! The country is run like a corner shop!

The Debacle of Hambantota Port

The port was inaugurated by Sri Lankan President Mahinda Rajapaksa in November 2010 amid much fanfare and marked by the ceremonial berthing of a Sri Lankan ship, Jetliner. But within weeks, speculation was rife that all was not well. No ships had called on the port, fuelling speculation that Sri Lanka's ambitions for the project might have been excessive.    
It emerged subsequently that at the time of its inauguration the port was not fully ready to begin operations. The government went ahead with its opening on November 18 as it was the president's birthday - an "auspicious day", as a statement issued by the Sri Lanka Port Authority (SLPA) put it.

The Hambantota port is not producing expected revenue and ships are being forcefully diverted from the port in Colombo. The port is simply a white elephant.

It is known as Mahinda Rajapaksa Port!

Bankrupt Airlines

Sri Lanka's state-run Mihin Lanka (familiar name again!), a budget carrier, has lost 5.8 billion rupees since it was started in 2007 and it had a 5.6 billion rupee gap in the balance sheet despite capital injections from tax money.

Mihin Lanka was started by the state despite the country's full service airline, Sri-Lankan Airlines making losses throughout most of its life on airline operations. 

Critics have held up the state budget carrier as a high profile example of tax banditry, arbitrary rule and lack of evidence based policy-making.

All Major Projects will be in Hambantota

In the last few years, major infrastructure development projects have been launched - mostly in Hambantota district, far away from the war ravaged north. Chinese moneylenders provide the capital on commercial terms. Economic and commercial viability of the projects are not considered.

The Rajapaksa regime wants to build everything in Hambantota for political reasons, regardless of commercial viability. Hambantota is a small sleepy town. 

It has just built a new airport in Hambantota! It is known as Rajapaksa International Airport! 

The Hambantota area is one of the poorest in the country and as such cannot be expected to help the airport generate considerable passenger traffic.

Many industry professionals have criticised the project, instead calling for the government to improve the already crowded Airport in Colombo.

It has also built a cricket stadium and it is known as Mahinda Rajapaksa International Stadium – no surprise here!

Sports Minister Mahindananda Aluthgamage told the BBC in 2011 that Sri-Lanka still owed more than US $18 million to the Chinese construction firm that built the stadium.

Riots and Looting

Looting of businesses owned by minorities is common in the country. Many of the riots are organised by the state and Buddhist monks.

There have been major riots in the country since 1915.

The Sinhalese-Muslim Riots (known as the 1915 riots) which began in Kandy soon spread across the country. The British Governor of Ceylon Sir Robert Chalmers, fearing he might lose control of the colony, on advice of Brigadier General Malcolm, came down with a heavy hand on the Sinhalese community, declared martial law on 2 June 1915 and ordered the police and the Army to shoot without a trial anyone who they deemed a rioter. With the escalation of the violence looting broke out in Colombo. 

Insider Trading and Corruption

The stock market has fallen sharply, following hikes in tariffs to tackle a worrying trade gap, as imports depleted limited foreign reserves. The result is an economy set to grow by just 6 per cent, alongside rising public discontent over increased living costs, which has sparked riots and strikes.

A recent S&P report pointed to the country’s weak external liquidity “in the context of low income levels, relaxed lending practices and underwriting standards, as well as a weak payment culture and rule of law.

S&P’s report drew attention to economic imbalances produced by the annual 28 per cent growth in credit during the past two years. The government has resorted to credit expansion to develop infrastructure projects, and attract local and foreign investment.

While this credit boost generated a short-term lift in the gross domestic product, signs of a debt crisis are emerging. It was revealed in parliament that the biggest state bank, Bank of Ceylon, had written off 11.3 billion rupees ($80 million) worth of bad loans last year. During the past 10 years, two state banks, Bank of Ceylon and Peoples Bank, wrote off 125 billion rupees, with the loan defaulters mostly backed by government politicians.

The S&P report also voiced concerns about government manipulation of the stock market, through pension funds controlled by the Central Bank.

Foreign Direct Investment (FDI) has largely been limited to luxury hotels and other tourism related projects. According to Sunday Times economist Nimal Sandaratne, foreign investment is being deterred by perceptions of corruption and arbitrary governance, as well as “continuous protests and violence” and “issues in media freedom that are highlighted around the world.”

Such allegations of cronyism and graft increasingly worry investors already alarmed by the resignation of the country’s top financial regulator last year, seemingly pressured by the administration to forestall investigations into stock price manipulation.

Political Violence

“Things are definitely getting worse”, says one western diplomat based in the country, citing worries over threats to journalists, opposition politicians and civil society figures, alongside a continuing spate of mysterious abductions of regime critics and Tamil civilians.

“They are trying to run the government as a dictatorial regime,” former army chief, Sarath Fonseka says. “Corruption has increased ... but the main opposition party is totally disorganised.” This pushes many to pin hopes of change on international pressure.

Since the first half of last year, Sri Lanka has faced a steady depletion of its foreign exchange reserves, driven by rising import and oil costs. That forced the central bank to hike interest rates and introduce import controls. It did not help that the government achieved only half of its target for $2bn of foreign direct investment during last year.

Human rights groups claim that there is a “disappearance” every five days in Sri Lanka - which is a higher rate than any country in the world, except Iraq.

Human rights concerns have also seen British Prime Minister David Cameron face growing calls to cancel or boycott a high-profile Commonwealth summit, due to be held in Sri Lanka later this year.

Stephen Harper, the Canadian prime minister, has already said he will not attend, while two former British foreign secretaries, David Miliband and Malcolm Rifkind, have called for the event to be moved to another country.

The concerns echo the recommendations of a report last year from the UK parliamentary foreign affairs select committee, which called on Mr Cameron not to travel to Sri-Lanka.

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