Going Global

There has been an influx of new rules and regulations, mostly seemingly meaningless, imposed upon the general public.

Take new motor traffic regulations. Some of the stuff I’ve heard belies all logic, like the imposition of restrictions on modifications. Let’s not even go near the banning of cell phones in schools which is obviously a badly thought out knee jerk reaction that bears almost no consequence on the actual issue. Even the 'porno rules' strike me as absurd, seeing as only a few locally visited smut sites have been removed.

But what the purpose these outcries are serving, intentionally or not, is to divert the public's attention away from the important issues. Like the political situation; is there any serious reform going to happen? What of the pro devolution and anti executive presidency lobby? It’s turned into a pro-porno one. And let’s not even talk about economic development; we can leave that in the expert hands of the government's mathematicians

What about all the dead bodies turning up, again? Sure we may say that it is a good thing because most of them are apparent gangsters. but do we seriously think that this is an idealistically motivated killing spree? I think it’s just about control. Whoever is instigating these killings, and I’m not accusing anyone, is aiming at consolidating power. The drug industry fills the coffers of a lot of people and, on a completely unrelated note, rumour has it that Potta Naufer is driven by the police to his home every night to enjoy his mothers meals.

Meanwhile, no one in power is going to stop sending their kids to school without phones; neither are they going to stop jerking off to the internet, doing drugs, dealing drugs, driving souped up cars without seatbelts and engaging in other general abuses of power.

Army of Dude links to this interesting article on soldiers who return home after war; namely Iraq. In the US, statistics have shown that war vets are 148% more likely to die in auto accidents than normal people are. Soldiers in the US take to motorbikes and bar fights to relieve adrenaline overloads. What of Sri Lankan soldiers though?

Being used to the adrenaline rush of war, and being around a climate of constant danger and uncertainty, conditions a soldier to thrive in such environments. Finding himself devoid of the excitement of battle denies him an outlet to this energy, sometimes resulting in disastrous effects to the soldier and society.

Deserters are a different story, although the crime waves influenced by army deserters over the past few years in Sri Lankan can probably be attributed to their disposition, one must also remember that usually crime is the only option available for an army deserter to make a living. (The Sri Lankan military recently pardoned all deserters btw.)

I live near an air force base where the soldiers are veterans who have been out of combat for a couple of years. Maybe this is a military strategy to ensure a more effective and long winded demobilization of the force, although i wondered why it was at the expense of the experienced and the battle hardened being kept away from the war during its peak; maybe my reasoning was off.

Anyways, new measures by the government to expand the military and maintain it as some form of peacekeeping force may contribute to calming the 'crotch rockets' of the Sri Lankan boys. Or who knows what would have happened if close to 200k battle high warriors started walking the streets looking for cheap thrills.

Makes this shocking accusation

By establishing a civil administration with its military personnel, under the guise of reconstruction and development the Government is attempting to change the demography of Tamil homelands in favour of the majority Sinhala population.

Like you mean, replace all the Tamils in there with Sinhalese? Or ensure that the 300,000 soldiers we have in the army settle down and marry into the Tamil population there and keep their crotch rockets firing long enough to out-reproduce the Tamils? Or are they planning vast re-movements of the population, moving in people from the South to dilute the concentration of Tamils in one place?

This has a more chilling note;

The Sri Lankan Government is also moving forward with schemes that will disable the socio-economic infrastructure of the Tamil people from being self reliant as one that would be controlled and made dependent on Sri Lanka’s South.

What he's trying to say perhaps, is that the government is trying to proactively restrict economic development in the North. By presumably denying opportunities for the North to prosper socio-economically in its own right through strong industries like tourism, trade and manufacturing.

This is unlikely because if the government were to do this, it would cripple and hold back the whole nation. The North-Eastern areas offer tremendous resources and capability for serious development.

If he is implying that the government, through the imposition of ownership rights and discriminatory laws, will deny the North-Eastern population ownership, property, entreprenurial and cultural rights then this gets more serious. But aside from being completely impractical if the goal is actual development, there is absolutely no evidence that this is going to happen.

KP seems all excited about his new venture

In this advanced cyber era I soon realised that it was possible (sharing of opinions) through a blog posting. This is why have I chosen to out to you using this method.

But he can at least make sense. And have credible statements to back up his claims.

A mercantilist or neo mercantilist stance is what helped economies like China, India, Japan etc to rise to be the economic powerhouses they are today. it was also the cause behind most of the greatest empires ever seen on earth, and is the root of American industrial power.

It involves a bit of protectionism of course; no doubt angering most liberal thinkers on matters concernig the economy, but mostly this will involve a genuinely cooperative relationship between business and government.

We are talking about reduced red tape and corruption. The whole structure of the government should be geared to help business. Its more than just a set of policy actions; its a mindset of its own.

Right now the government is strapped for cash. 90% of current government revenue is also spent on servicing our debt. that is, our existing debt.

This is resulting in the crippling of business funds for certain essential industries like Tea and Coconut, which rely on reinvestment of the revenue they bring in to develop their industries, having a severe effect on the long term profitability of these businesses.

The government is absorbing cash fom any and every avenue they have access to and this is having disturbing and distorting effects on the economy. The recent stock market bull run has also now slowed as foreign investors begin to sell to cash in on their profits.

Draconian laws and pointless regulation cripple industry and business on many fronts and these will have to be eliminated. Most importantly the mentality of public servants must be changed and the public sector itself must be put through a restructuring process.

Special instances should be managed outside the normal vertical rigid structure of government. for example, this is how Malaysia coped through the Asian Crisis.

Right now all the government seems to be doing is fire fighting away; thats quite understandable seeuing as we just emerged from conflict. heres hoping we find out some concrete and practical vision like a Mahinda Chinthanaya for the economy soon.

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.

After years of being ravaged by the war the North-East is set for more Booms. But this time we are hoping for a good boom. As in an economic boom.

With the opening up of the territory, firms have already begun to show interest in expanding into the North East. The obvious beginning would be to start with production, like agriculture and fisheries. Once these base industries are developing then there will be more room and demand for industries such as banking and telecommunications to enter the fray.

Tourism is looking positive with firms like John Keells, Softlogic Holdings and some foreign parties expressing interest to invest (FT). Although we will still be under the gloomy canvas of low tourist turnover due to the global financial crisis there should be enough demand to justify large investment in North-Eastern tourism.

Marketing will play a big role in making tourism a success and this is the perfect time for the industry to seize a chance for a comprehensive international campaign. Tourists are more picky with their destinations and will need a lot of convincing to invest their money in a particular alternative, the SL industry must fight now to create the worldwide buzz and top of the mind awarenss of a top tourist destination. I blogged about another possible marketing angle here.

Other industries set to boom include construction and engeneering consultancies. There will hopefully be a lot of inflow of funds with China and Iran already pledging some USD 1 billion and 1.9 billion respectively (FT). Construction funds must be used wisely and wherever possible, local firms should be enlisted to contracts in a way that efficiency is not compromised.

On the topic of efficiency, everyone is now worried about corruption and the mishandling of development funds by corrupt government officials. Of the tsunami aid scenario was anything to go by the Rajapakshe administration will have to ensure that none of that occurs this time around. But this may be asking for too much.

Government revenues are dropping, while expense is set to increase a lot according to Dr. Srimal Abeyratne senior econ lecturer at the Colombo University speaking to the Financial Times. The governments expected revenue increase of Rs. 200 billion is said to be too optimistic as the industries on which it relies on for tax income are suffering too much as a result of the global crisis.

The government needs to ensure optimum efficiency gains and ensure it uses its current strong position to make some concrete changes in the public framework that will improve the government services sector. This includes cutting staff and saying no to loss making departments. '..In the long term, these painful changes will strengthen the government's traditionally weak financial position' says Dr. Abeyratne.

A mini credit crunch in the local banking system is not helping anyone either. With the central bank's reduced interest rates not being translated into cheaper commercial lending rates. leasing companies have jacked up their deposit requirements and the velocity of money is down because of high saving rates and low consumer spending. This needs to be eased up.

Whether these changes happen or not, it is apparent that we may have a shot at having a better chance of riding out the ill effects of the global financial crisis if we experience (and more importantly, take advantage of) a mini boom in Sri Lanka. Hopefully when the boom begins to subside the global system would have reached a more stable position, helping to prolong it.