Going Global

The hot seat

On Saturday i was coming into Colombo from Wattala to attend a wedding with a few friends. There was a major traffic jam and we were consequently stuck on the road for quite some time. The reason being of course that His Excellency the President of Sri Lanka was on his way to receive some rare (read: probably obscure) honor for his efforts for providing us with freedom.

There are talks of new taxes being imposed. Apparently there is also a seatbelt fine. You get fined if you don't wear your seatbelt. From what i heard its somewhere like 2000 rupees per offense and repeat offenders get to go directly to the courts. Sri Lankans are notorious for not wearing seatbelts so this should net the government a handy sum if imposed and acted upon.

Im curious, is it cos i don't know of these things or is there really no mechanism that lets the public be aware of the rationale behind new legislation and policy stances? Ideally there should be reasearch studies out about frequencies and causes of road accidents to support the seatbelt tax. What i think happened was that some smart alec minister came up with a good 'suggestion' to find some fast cash without the public getting too pissed off. I mean hey, we can all keep our seatbelts on if we don't want to pay yeah. And most of the voter base doesn't really own cars anyway.

The Military

The army is expanding. I heard from the Armchair Warrior Grapevine that this is necessary to secure the area. More soldiers are apparently required to secure an area than to fight it. Maybe i can see the sense in that. Seeing as the LTTE seem to be regrouping now, but still it doesn't look like the taxes are going to subside becuse of this. Also, for the suparlative and the trivia fan, the Sri Lankan military apparently will be the 10th largest in the world if the expansion is carried out.

This also ties into the IDP issue; the government is insistent on holding them for at least 2 to 3 years while international pressure, for what its worth, keeps insisting they let them go. Reports of opressive paramilitary activities at IDP camps abounded and were pretty morbid. But living conditions have now improved according to the IDMC. The government insists it needs to 'weed out' possible tiger cadres hiding within around 300,000 IDPs in vaious camps in the North East and they have just released about 2000 people who have been camped for about two years now.

Our GDP may sink. As defense ependiture reduces the contribution of government expenditure. Although development may pick it up. I read in the Times that there is a 50 million dollar resort of a number of boutique hotels coming up. Hopefully more development will happen and help us with our forex problems which brings us to,

The Economy

Economy wise we seem to have reached a firmer footing. According to this LBO article our balance of payments crisis which was formed by the CBs soft peg is somewhat over. It happened when they sold what dollars they had to buy back rupees to keep up the rupee exchange rates, perhaps helping temper the cost of war imports. What they also did though, was to print more rupees at the same time, defeating the purpose of the peg. Thereby needing even more dollars to fund the thing and avoid a major currency collapse.

I guess they were gambling it all on the war being over, and it's paid off. There has been some foreign inflow and the government has even pulled of a US bond sale which was oversubscribed by about a 100%. Assertions that the need for that IMF loan have lessened seem a bit credible now. There is investment coming in and development projects in line for the liberated territories especially. Although i am not clear as to how much corruption and inefficiency will stunt it.

Industry seems to be suffering with a lot of jobs being lost in the recent spate of downsizing that hit the garment field and other industries. Foreign remittances are also on the decline and many workers are having to return home.

There are signs that fuel prices may be on the rise, with LIOC lobbying for a price increase, the government has insisted it is not planning on raising prices but that is a regular government tactic to calm the people before they go ahead and increase the prices overnight. As was seen in the past.

Interest rates need to be lowered. There is a reluctance by most banks to do this, the current environment still being favourable for high interest rates, but lending has frozen somewhat and domestic demand needs to be stimulated. There are already efforts to get this underway.

What next?

Overall, I feel the outlook is lukewarm. Im not by nature an optimist. But i'm not too pessimistic about our future either. The end of the war is widely speculated to stimulate interest in investments especially in the North East and this will have spillover effects on the rest of the country as well.

If i am a little skeptical, it is with regard to the country's leadership and direction, will they handle the redevelopment efficiently? And also the environment of suppression of free expression that is prevailing right now is a cause for concern. We need a more independent media capable of pulling up those in charge without fear of repercussions. Someone needs to monitor the monitors afterall.