Sirisena Amarasekara

Sirisena Amarasekara is a Sri Lankan public servant and diplomat. He is the former Sri Lankan High Commissioner to South Africa, Mozambique, Namibia, Zambia, Zimbabwe, Lesotho, Angola, Botswana, and Eswatin. He had functioned as the secretary to the Prime Minister on two occasions, and as the secretary to the Cabinet of Sri Lanka. Having completed more than 50 years of public service, Amarasekara is one of the most senior Sri Lankan public servants.

Starvation in Sri Lanka: Is it A Product of Policy Makers and Professionals? – Part 1

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Self-sufficiency in food was the focus of the agriculture sector policy in Sri Lanka, even before the independence. But the quality and the display of the local food items offered to consumers in the market are yet to be improved substantially. The prices are exceptionally high compared to many citizens’ purchasing power and the country’s per capita income. According to the Household Income and Expenditure Survey -2019, Sri Lankans’ average monthly household expenditure on food is 35.1%, leaving a low share for non-food expenses, which is an indicator of the poor quality of life. The situation could be much worse among the middle and low-income groups, and the malnutrition level is increasing. Sri Lanka’s agriculture, especially the food crop subsector, is yet to be modernised with new technology and commercialised. Despite those constraints, the country had reached near self-sufficiency in essential food items by 2022.

The aftermath of Covid-19 and the government’s policy mismatches suddenly brought the country into a catastrophe in 2022 without sufficient local or imported food. According to the Colombo Consumer Finance Index, food inflation in September 2022 has risen to 94.9 %, which means citizens’ food affordability has been reduced by almost 50%. According to the FAO, 78% of the population suffered from food insecurity in the latter part of 2022. Most people attribute the whole responsibility for the food crisis of 2022 to banning agrochemicals. Though it was the immediate and foremost reason, several other structural issues have aggravated the situation. The situation could be returned to the pre-2022 position in a few seasons after lifting the ban.  Still, the shortcomings inherited over a long period in local food production may continue unless those are adequately addressed. Food prices are yet to come down to match the income levels of the majority through improved productivity and quality. Therefore, this article aims to understand the present food crisis in relation to the policies and strategies followed by the different governments over eight decades and their pros and cons. The focus is to discuss some remedial actions based on historical evidence and my brief experience in the sector.

The Sri Lanka National Agriculture Policy paper, prepared by the government in 2020, says, “The agriculture sector will continue to play an important role in the application of strategies targeted towards planned socioeconomic development of the country. Rapid growth for the agricultural sector, particularly the domestic food production, floriculture, and export crop sectors, is essential to achieve self-reliance at the national level, ensure food security and bring about equity in the distribution of income and wealth for alleviating poverty.” It shows that policy-wise, the government has firmly committed to developing the agriculture sector as a strategy for macroeconomic development. According to the population figures in 2021, eighty-one per cent of Sri Lanka’s population lives in rural areas. As per the labour force statistics, in 2021, 27.3 % of the total labour -force was employed in agriculture. Still, their contribution to the GDP was only 6.9%, which shows that the farming population is relatively poor. As a cultural practice, almost all rural people in Sri Lanka engage in agricultural activities in one way or another. If not for their main employment, they do agriculture as a source of supplementary or secondary income or at least to produce their food. As such, the Sri Lankan labour force engaged in agriculture is much higher than the figures shown in labour force statistics. Despite many drawbacks, local food production had increased considerably by 2023, but at a very high cost to the public coffer for over eight decades.

Evolution

Under the colonial administration, plantation crops were the priority sub-sector of agriculture. Domestic agriculture, especially food production, was not a priority. In 1931, under the Dhonurmore Constitution, the decision-making power for local matters was substantially transferred to the State Council of Ceylon, represented by elected local representatives. Since then, the translation of nationalism and patriotism into action was commenced in many aspects of society. D. S. Senanayake’s vision as the Minister of Agriculture and Landin the State Council of Ceylon was that colonising the thinly populated dry zone is the only solution to land hunger poor peasants in the densely populous wet zone, self-sufficiency in rice and food security.D.S. Senanayake’s imagination in the colonisation programme seems to create a group of contented middle-class farmers like the rural elites in the traditional villages. Accordingly, 5-10 acres of irrigated and high lands were alienated to colonists. It was also expected to reduce the increasing pressure on land to produce food and housing in the hill country and the wet zone and generate full-employment opportunities for the peasant community. Accordingly, he prioritised domestic agriculture and the Dry Zone Colonization programme. After becoming the first prime minister of Ceylon in 1947, his son Dudley Senanayake was appointed as the minister in charge of the subject to continue the programme with the same priority. Also, the second World War outbreak validated the need for food self-sufficiency. The food scarcity in the war environment encouraged the peasantry to food production and the colonisation programme. During wartime, in 1942, a scheme to purchase paddy under a guaranteed price well above the market price was also established. Since then, the guaranteed price for paddy, above the market price, has become a permanent feature.

The colonisation scheme was a massive and ambitious program involving the supply of irrigation and drinking water, social and physical infrastructure, housing, land clearance for farms, settlement of people in a complex, unfamiliar environment, establishing the public administration and public service delivery system, etc. All settlers were allocated an equal extent of land, which could not operate with the family labour. Different from the wet zone, there was no agricultural proletariat or social arrangements to work on medium size farmlands, especially during the cultivating and harvesting periods. Unlike in the wet zone, sharecropping arrangements (Ande Cultivation) or hiring casual labour was impossible, as all settlers were landowners. Farm mechanisation was also rare in the early stages, but many colonists became unemployed during off-seasons. Unlike in the wet zone, there were no modern large plantations to find wage employment during off-seasons. The colonisation programme reinforced the same peasantry agriculture in local food production, creating a dichotomy between plantation agriculture and local food production. Though there were many economic and social issues at the beginning, with continuous and substantial government supports, these colonisation schemes became sustainable. In addition to the above programmes, in line with the then policy, government-owned farms were also established in different parts of the country under the department of agriculture. These were considered model farms to introduce new farming technics, increase food production, create wage employment, seed production, etc.

The colonisation program helped to reduce the population pressure in the wet zone and increase rice production to a certain extent. However, it was an extension of the area under cultivation with the traditional smallholder farming system, more than increasing productivity under modern farming practices using technology.  Also, most of the second and third generations of settlers became unemployed. Many of the settlers were socio-economically backward and needed to gain experience even in agriculture at the beginning. Under this socio-economic environment, only a few entrepreneurs ventured into non-agricultural activities to generate employment for the second and third generations.

Green Revolution

Though there were some shortcomings in the D.S Senanayake’s Agriculture policy and strategies (expansion of the area under cultivation through land alienation, irrigation facilities, colonisation, model farms, and guaranteed paddy prices Etc.), its positive factors were attractive. The policy continued without many changes during the Bandaranaike governments from 1956 to 1965. In 1965, Dudley Senanayake’s government also prioritised the agricultural sector and continued along the same path. Moreover, the international program of the Green Revolution influenced the agriculture policy and the program in this period. The agriculture sector benefitted from the productivity improvement agenda of the green revolution, such as farm mechanisation, chemical fertiliser, highbred seed, pesticides, weedicides, etc. Consequently, productivity and local food production have significantly increased.

In addition to the smallholder sector, the Dudley Senanayake government gave prominence to large-scale farming, enabling the transfer of new technology and thereby reducing the cost of production, improving quality, and providing wage employment for the rural poor. To this end, his government leased relatively large plots of land in the dry zone to the corporate sector and entrepreneurs. The government facilitated lessees to import machinery, equipment, vehicles, etc. This is a deviation from the previous policy of the dry zone colonisation program at a high cost to the national budget and reinforcing the smallholder system. However, large-scale farms and large landholdings were not compatible with the Land Reform Policy of Mrs Bandaranaike’s government, which came into power in 1970 with a coalition of left-wing parties. Under the land reform policy, land ownership was limited to 50 acres per person. Most of these farms were acquired by the government or abandoned by the owners due to the fear of acquisition and lack of government policy support. If this programme had been continued, it could have become much cheaper than colonisation schemes to create employment, increase production and productivity through technology, and transfer the technology to local farmers.

The newly established Mahaweli Programme had much potential for large-scale commercial farming. The open economic policy had been introduced by this time, and trade was liberalised. But the government followed the same concept of smallholder farming. Several large land blocks of marginal lands without water and infrastructure have been leased out to entrepreneurs. Due to the threats of wild animals, lack of water, agriculture proletariat and other infrastructure, the tenants abandoned most of such blocks. They passed them on to several hands with little development. All settlers in Mahaweli were equally poor, and most could not purchase agricultural equipment. Unlike their original villages, in the beginning, there were no entrepreneurs who could afford to hire equipment for small-scale farmers. If extensive holdings had been allocated to entrepreneurs randomly on arable lands, they could have been instrumental in diversifying and changing the economic structure. It could have been a facility for the poor settlers to obtain inputs and other services required for farming and daily needs. Also, they could have generated employment in off seasons and for the second generation. Sri Lanka missed both opportunities (Mahaweli and Dudley’s leasing scheme of more extensive holdings) to establish large-scale private-sector farming for rice and other food crops. If Sri Lanka had utilised the above opportunities, the food crops subsector would have been commercialised and modernised, leading to high quality and low cost with value addition, like in many other countries.

Import Ban/Restriction of Food Items

During the 1970/77 period, the policy of self-sufficiency in food and the promotional strategies for local food production has been further strengthened through import controls. Regulations were introduced to reduce rice consumption and encourage the consumption of locally gowned pulses, yams, grains, etc. A massive Food Production Drive named ‘’WagaSangramaya” was launched in 1973, and a vast enthusiasm was created among the citizen to cultivate and economise the food. All government-owned farms were fully utilised, increased seed production and introduced new crop varieties. Import bans resulting in high prices encouraged the cultivation of marginal land and uneconomical crops to the country’s agroecological condition. This overenthusiasm led to the mal-allocation of land and other resources and high-cost and low-quality products. The ban on importing all food items was not a result of the 5-Year Development Plan of the then government. Still, it was necessitated due to the foreign exchange crisis, like the situation in 2022. Before the 1970/77 period, local food production was mainly a subsistent activity of poor peasants. Due to the import restrictions, a dichotomous situation has been created in domestic agriculture. While poor peasants were doing subsistent farming, some people commenced commercial agriculture aimed at the broader local market but at low quality and high prices. However, during this period, many import substitutes, such as lentils, chillies, yams, milk, sugar etc., emerged from subsistent farming to commercial farming. Suppose the government had continued tariff protection and advisory services, with corrective measures for a few more years. In that case, some products with comparative advantages could have been established as viable economic activities.

Sluggishness

The free trade policy introduced in 1977 allowed the import of almost everything without restrictions. The market was flooded with imported cheap food and consumer items creating a new demand for foreign exchange. The newly open trade sub-sector did not increase the foreign exchange earnings to match the increased need for food imports. Due to the sudden and unplanned trade liberalisation, commercial farmers could not face the competition from imported foods and were compelled to abandon farming. It resulted in rural unemployment, especially among the agricultural proletariat. The poor peasants, who could not integrate with the new economic order, remained subsistence farmers. The Banking system also prioritised the trade sector, which is less risky and profitable than agriculture lending. Domestic agriculture lost the policy support and backup services such as research, seed production, extension services and bank lending. Meanwhile, Mahaweli Authority established its own system to provide advisory and input services for Mahaweli farmers undermining the regular agriculture department’s authority.

The Department of Agriculture is one of the oldest departments in the country, manned by highly qualified professionals. Sri Lanka had a well-organised extension service for the food crop sector under its department of agriculture, integrated with research, demonstrations, model farms, demonstrations, in-service training for officers and a comprehensive field network comprising district-level officers (assistant directors), subject matter specialists, zonal officers (agriculture instructors) and village-level officers (KrushiVyapthiSevaka). The extension division and the research arm at the centre supported the field network. From time to time, different systems of extension service have been experimented with and implemented nationwide with uniformity. As such, extension service has been developed over the years through an evolutionary process till the late 1980s.

After establishing the provincial council system in 1987, agriculture extension was devolved to provincial councils. Since then, the sub-national level network of the extension service has lost connectivity with research and other divisions of the Agriculture Department and the Ministry. Also, the village-level extension staff (KVSs) were absorbed into the cadre of Grama Niladari, creating a vacuum at the field level. Later, in 1999 a new cadre of field officers named “Agriculture Research and Production Assistants” was appointed, but they did not have professional qualifications or experience in research or extension works. They coordinate agriculture inputs delivery and enforce agriculture-related Acts of Parliaments such as the Agrarian Development Act, The Paddy Land Act etc.Agriculture extension, especially the food crops sub-sector, has been severely affected after the devolution of power to nine independent provincial councils. Occasionally extension programmes are being implemented by provincial and national agencies without proper coordination between the two levels. Sometimes, those are incompatible with each other. Since the government has an aloof attitude toward the extension service, unprofessional business-minded agrochemical vendors are filling the vacuum with non-scientific advice. Therefore, a comprehensive national policy and strategies with a coordination mechanism at the national and sub-national levels are paramount.   The extension service needs more recognition from the government at both national and provincial levels. When the government attempted for organic farming-only policy, vacuums of the extension service were visible. There was no field network of extension staff to educate farmers on organic farming, and neither the farmers nor the fertiliser vendors had scientific and practical knowledge of organic farming. 

Contented at a Low Level of Achievements

For several decades, with some degree of ups and downs, a unique smallholder farming system has been developed in the country with a combination of government subsidies, some degree of tariff protections, some elements of subsistence farming and the modern agriculture techniques introduced under the green revolution (highbred seeds, chemical fertiliser, other agrochemicals, modern machinery, and equipment etc.). Under this equilibrium, the labour component of the farm inputs has decreased, and the land and labour productivity increased considerably. The country became nearly self-sufficient in rice, vegetable, fruit, and coarse grains such as maise production. Inputs supplies, prices, farming practices, farmer behaviours, consumer preferences and logistic aspects had stabilised to match this equilibrium (sufficient quantities at a relatively high price and low quality, but all stakeholders are substantially satisfied). So, to a considerable extent, the security of essential food items was ensured through local productions.

Moreover, those developments have brought the country many social and environmental benefits. Childlabour, which was abundantly used under the traditional farming system, was released from farmlands enabling them to continue with education. The customary use of women’s labour in farming was also considerably reduced, allowing them time for childcare, family welfare and other non-agricultural activities. In addition to the family food needs, most farmers could produce a marketable surplus that improved the physical quality of life. The Chena-farming (slash and burn) system, which increases the demand for land and harms the environment, has been reduced dramatically. Instead of moving from one land to another, farmers started cultivating the same land regularly with the blessing of the improved farming system. Consequently, many new settlements have developed with urban facilities, which changed the lifestyle, bringing many social and economic benefits.

Interruption

However, during the Government of good governance (Yahapalana Government), from 2015 to 2019, except for chemical fertilisers, other necessary agrochemicals, especially weedicides,were suddenly banned. Sri Lanka depended for many decades on agrochemicals for weed and pest control.By this time, farmers had lost the traditional knowledge of insects and weed control.The Chena Farming system, which doesn’t require agrochemicals also not in practice. Characteristics of improved/highbred seeds were incompatible with conventional weed and pest control practices. Farm labour was not readily available, and the cost of manual wedding had become high. It is yet to develop planting and weeding tools/machinery and planting practices appropriate to our agroecological conditions, soil conditions, and terrain and acceptable to smallholder farmers. This new situation mainly affected tea plantations and Paddy cultivation. Seed broadcasting, the paddy cultivation practice commonly used by farmers, is inappropriate for mechanical weeding. So, farmers could not positively respond to the new challenge. Consequent to the new challenge, farmers faced increasing production costs, while productivity fell below the previous years. Some farmers abandoned the cultivation. After banning the agrochemicals, the Paddy production in the 2016 Yala season dropped to 1,517,392 metric tons from 1,942,408 metric tons in Yala, 2015. Further, the production of the 2016/17 Maha season has fallen to 1,473,832 from 2,902 693 metric tons in the 2015/16 Maha season. This downfall is not purely attributable to the agrochemical ban; climatic and other factors may have contributed to it.

For many years, the use of herbicides had been promoted as a cost-cutting technic in the tea plantation. When labour became more expensive, weedicides became a blessing in disguise for the tea plantations to reduce the cost of production.  Like the paddy sector, the country had not developed planting methods and appropriate tools/ machinery for weed control in tea plantations. Consequently, the cost of production increased, and productivity dropped. In 2016, tea production fell to 292,000 metric tons from 328,960 tons in 2015.

The Sri Lanka National Agriculture Policy- 2020 accepts that the productivity of the agriculture sector in Sri Lanka still needs to improve. It further says, “The agriculture sector was also not geared to absorb the rural unemployed compared to the other sectors of the economy. It is necessary to reverse this trend and improve the agricultural sector to meet the aspirations of the people, particularly that of the farming community.” Further, the policy highlights the need for promoting the production and utilisation of organic and bio-fertilisers and gradually reducing the use of chemical fertiliser through the Integrated Plant Nutrition System, ensuring timely availability of chemical fertilisers in sufficient quantities, and providing soil and plant testing facilities for their rational use and minimising the use of synthetic pesticides through promoting bio-pesticides and integrated pest management.  This policy and strategy about agrochemicals seem sensible and timely. However, any attempt to absorb the ever-increasing unemployed into agriculture would be an attempt to share poverty with the second and third generations.

Going Backword

While farmers were attempting to adapt to the situation created by banning agrochemicals by the the Mithripala government, banning the import and use of chemical fertilisers without prior notice, preparedness, and alternatives by the Gotabaya government in April 2021, affected the entire society and the economy facing famine by much of the population. It is contradictory to the documented policy and strategies of the agriculture sector.  The move is suspected of an attempt to save US$ 300 to 400 million in foreign exchange, which the country spends annually to import fertiliser. Before the public, the President justified this move as the remedy to prevent increasing kidney disease and materialise the Sri Lankans’ rights to non-toxic food. He further promised to compensate for the income loss due to organic fertiliser application and import organic fertiliser to fill the gap due to the sudden decision. He also expected Sri Lanka to be the first to adopt the 100 per cent eco-friendly organic farming policy.

The farmers’ attempt to produce organic fertiliser in homesteads failed due to a lack of sufficient biomass and the long gestation period. Fertilisers produced by some entrepreneurs were of inferior quality, not acceptable to farmers and many malpractices were evident. An attempt to import organic fertiliser from China failed due to the debate on quality and procedural issues. The desperate government attempted to import organic liquid nitrogen from India. But that also ended up with quality issues and corrupt practices. The production loss was enormous, and the government did not have sufficient funds to compensate for the income loss of farmers. Eventually, the government ended up with a nightmare of wasting more foreign exchange, which was in short supply, to import fertiliser and essential food items. The outcome is creating a black-market price for agricultural inputs and food items. Towards the end of 2022, 78% of the population became food insecure.Most of the farmers abandoned the cultivation of seasonal crops. The productivity and quality of plantation and perennial crops have dropped drastically. Paddy production in the 2021/22 Maha season dropped to 1,931,230 metric tons from 3,061,394 metric tons in the previous Maha season. The average production per hectare also dropped from 4,307 Kg. to 2,853 kg.

After creating a big socio-political and economic nightmare, the government wriggled out of the concept of organic farming. Restriction for importing and using agrochemicals, including chemical fertiliser, was removed in early 2022, leaving long-lasting adverse effects. Though the ban was lifted, the agrochemical market was distorted by unscrupulous importers and traders, making the price unaffordable to farmers. This distortion may remain for a few more cultivation seasons. Perhaps some farmers who have left farming may not recommence. This nonsensical policy decision of 100% organic farming destroyed the entire agriculture sector built through subsidies and some degree of scientific inputs for more than 80 years. The government should have realised that the country doesn’t have sufficient biomass to produce the organic fertiliser required for 100% organic farming. Most of the land used for seasonal crops in Sri Lanka cultivate for 2 or 3 crops a year without a fallow season, leaving little room for the natural process of soil enrichment. Therefore, using a high dose of fertilisers is a must.

The Mithripal-Ranil government and the Gotabaya Rajapakse government justified the ban based on the assumption that the cause of chronic kidney disease of unknown origin is the continuous use of agrochemicals in agriculture. However, it is yet to be proven scientifically. Though we exaggerate the ancient glory, the high price, periodical and seasonal scarcity of food and starvation was common problem till the recent past, which highly affected the poor. Though agriculture has not developed as it should, consequent to the green revolution and the Mahaweli scheme, the food supply situation improved, and the price became affordable for most of the population. Whatever the economic and political issues we face from time to time, farmers cultivated without room for famine. The immediate impact of the organic food policy was that food inflation in September 2022 had increased to 94.9%, per the Colombo Consumer Price Index. According to a survey conducted by WFP in September 2022, more than 1/3 of the population is in food insecurity, which rapidly increases child malnutrition.  Though organic farming is a good move to provide healthy food, if the country continues with that policy, most people will not be able to afford the high price of organic food. They may face starvation and periodic and seasonal food scarcity again. Then, the better-off, who can afford the expensive organic food, would live longer, while the life expectancy of the majority is decreasing.

Layman consumers believe that the frequent insecticide/fungicide sprays on vegetables and fruits are more dangerous than weedicides and chemical fertilisers. The fundamental problem in Sri Lankan agriculture is not the use of agrochemicals but the overdose for various reasons. The farmers’ knowledge of fertiliser and other agrochemical applications in what quantity, time, soil types, type of pest etc., are limited. They learn by trial-and-error method, not by understanding the chemical composition. If one chemical is not answering, they use another. Vendors prescribe those, and vendors also learn from the trial-and-error experience of farmers. In most farmlands, broadcasted urea is exposed to sun and rain, allowing a considerable amount to evaporate, or wash off.

To be Continued

Ethnic Conflict in Sri Lanka; Is it an Upshot of Free Education System? – Part II

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This is the second and last part of this series, click here to read the first part. ~ edits

Rebellion in 1971- A Consequential Impact of Free Education

However, the failure and the delay in resolving the unemployment problem became significant causes of the first youth uprise (JVP movement in 1971) against the newly established United Front government. This insurgency movement was led by the unemployed graduates and educated youths of the Sinhala community, especially the rural youths. No Tamil youths took part in this rebellion. The unemployment problem would not have been a significant issue, or their leaders would have diverted emerging frustration to a different direction to carve out a separate Tamil country.

After defeating the insurgency movement, the government implemented many socio-economic reforms hurriedly based on the lessons learned. Various reforms in the education sector, including standardisation of marks for university entrance, changing the school curriculums, land reforms, nationalisation of foreign investments, employment generation scheme to reduce rural unemployment (Divisional Development Council Projects), agriculture reforms, import restriction to boost the local production were a few of them.

These programs were done in a hurry, but the government and the country needed more resources, capacity, and preparedness to address those issues reasonably, equitably, and sustainably simultaneously. As discussed before, since the 1960s, the Sinhala community, and the educated youth, have been agitating to regain the socio-economic opportunities they had lost during the colonial period (ethnic imbalance in education and public administration).

Discrimination against Tamil Vs. Favouritism for Sinhalese

The policy of standardising university entrance was introduced in 1971. Under this, a quota system, using the language of the university entrance examination as the parameter, was introduced to correct the historically existing ethnic imbalance. The number of allocations for university entrance was proportional to the number of participants who sat for the examination in each language. Also, considering the long-felt grievance of Sinhala stunts (i.e., lack of opportunities for admission to faculties of engineering, medicine, and science), a lower mark system was introduced for Sinhalamedium students for those subjects. The new system discriminated against Tamil medium students and favoured Sinhala medium students. Tamil Medium quota dropped to the bare minimum. While correcting the ethnic imbalance in general, the limited allocation made available to Tamil medium students was mainly enjoyed by students at reputed schools in Jaffna city. The Sinhala language quota was also mainly enjoyed by students at reputable schools in Colombo. It defeated the original policy objective of expanding higher education facilities to low-income families and rural areas. In 1972, a district quota system within each language was added to the parameter to correct this anomaly.

Before the introduction of the language-based standardisation system, the Tamil community enjoyed the lion’s share of opportunities for science subjects in university education. According to 1969 figures,27.5 % of the university entrance to science base faculties such as medicine, engineering, physical science, bioscience, etc., had been enjoyed by the Northern Province, which is predominantly populated by Ceylon Tamils who comprised only11% of the country’s population. Out of the balance, 72.5%, a significant share (67.5 %) had been enjoyed by the Western Province, which is open for elites of all ethnic groups, leaving only 5% for the majority rural Sinhalese and most of the rural/poor Tamils. After adding the district quota system, 1974 figures show the Northern Province’s share of science education was reduced from 27.5% to 7%. Also, the share of Western province declined from 67.5% to 27%, demonstrating a better distribution of science-based higher education opportunities among rural regions and a relatively higher percentage for rural Sinhalese. The system favoured the backward regions for science education and affected urban elites of all communities. But favouring the Sinhala medium students in university entrance and science education adversely affected all Tamil groups regardless of their social status. It caused severe frustration among all Tamils.

Since the independence, Tamil political leaders have fought for a separate Tamil country but could not mobilise mass support from their community. As a result of the above standardisation system, they got a perfect tool to articulate the interest of Tamilyouthsto fight for a separate Tamil country. Moreover, before 1970, Tamil political parties had good bargaining power with successive governments, as none of the ruling parties had a significant majority in the parliament. However, SLFP led United Front in the 1970 general election, and UNP in the 1977 general election got an overwhelming majority in the parliament. Therefore, those two governments could ignore Tamil parties and their demands. As a result, Tamil-dominated areas of the country lost political patronage and bargaining power in government-sponsored development programs. All of these contributed to emerging radical groups, and many started advocating violence to win the Tamil Country of Elam.

Under this scenario, Tamil youths may have thought winning a separate country for Tamils would resolve their unemployment and other economic problems. Perhaps, their traditional political leaders may have planned to use these groups (educated unemployed and lower strata of the society) as a cat’s paw to carve out a separate Tamil country and enjoy the feudal socio-political power and enjoy the Tamil Vellala Cast supremacy.

The language-based standardising system for university entrance was abolished in 1977 and introduced a new approach based on merits and district quotas for less developed districts. It ensured the fair distribution of opportunities among all districts. Jaffna and Colombo benefitted from the merits system, while Tamil and Sinhala Communities in remote areas benefited from district quotas. Though the mistake was corrected later, the distrust between the two communities remained unresolved.

Is Tamil A Recognized Language In Sri Lanka?

With the introduction of the Free Education bill in the State Council in 1943, teaching in vernacular (Sinhala or Tamil) in government schools became compulsory. The government had legally accepted Vernacular education since the Colebrook commission’s recommendation in 1841 and has given equal status to both Sinhala and Tamil languages in education. As discussed, a small percentage of government grants were available to vernacular schools. Any person to be fully qualified in the national examination of the ‘General Certificate of Education (Ordinary Level),’ a credit pass in the mother tongue is compulsory. Sinhala and Tamil languages are contemporaries as mediums of instruction in Sri Lankan universities.  Also, according to a circular issued by the Department of Education in the year 2000, the Tamil language is a compulsory subject for all Sinhala medium schools from grade 1 to grade 9.

Tamil Nadu is predominantly a Tamil State in India, and apparently, it is the motherland or original homeland for the Tamil people and the Language. According to the 2001 Census, Tamil is spoken as the first language by 88.59% of the Tamil Nadu population. However, Tamil Nadu Tamil Learning Act was passed very recently in 2006. According to this Act, State Board and Matriculation Schools had to teach Tamil as a compulsory subject from Class 1 in a phased manner, gradually scaling up to Class 10.  However, it was not fully implemented due to various objections, and now it is rescheduled to be completed by 2025. But Sri Lanka has been given equal opportunity for Sinhala and Tamil languages in education since the establishment of formal education under the recommendation of the Colebrook Commission in 1841.

Tamil Nadu Official Language Act -1956, which is an Act to provide for the adoption of Tamil as the language to be used for the official purposes of the State of Tamil Nadu, became effective in July 1958.  It is not a national language that can be used all over India for official purposes. But according to the 13th Amendment to the Constitution of the Democratic Socialist Republic of Sri Lanka, both Tami and Sinhala are official National languages with equal status all over the country since 1987. Even without a constitutional provision, the government used Sinhala and Tamil to communicate with people and judicial matters before 1987. Today any Tamil-speaking person who lives in any part of the country has the legal right to communicate with the government in the Tamil Language. According to the language policy since 2000, all public servants must be competent in the second language within five years of joining the service. Under these circumstances, as an official language, Tamil has better recognition in Sri Lanka than in Tamil Nadu, India.

 Free Education And Terrorism Contributed ToDenude Educated From the North

Long before bearing the fruits of the free education system in the country, the Jaffna peninsula was inundated with professionals in all fields (doctors, engineers, accountants, scientists, mathematicians, etc.). Sometimes, government institutions in Jaffna were overstaffed with those specialities or had more than required due to various socio-political reasons. After retirement, most professionals who worked in Colombo or other parts of the country and abroad went back to Jaffna to spend their retirement life. Consequently, some local government institutions, community-based organisations, farmer organisations, and co-operative societies were handled by highly educated retired professionals, and those institutions became very successful. Jaffna became the hub of knowledge in then Ceylon. However, Due to the terrorist movement, the process started reversing. Educated/rich People who had the capacity and resources migrated to other countries, and others settled in and around Colombo. In contrast to the situation before the 1980s, today, many Tamils do not wish to settle down in Jaffna after their retirement but want to stay in Colombo and its sub-urban areas. 

After the 1980s, those who achieved success through free education did not wish to go to their hometowns in the north due to terrorism and the existing social stratifications.  Even today, the professionals of low strata of society, who are nationally and internationally recognised, can’t receive due recognition and respect in their hometowns. Therefore, they prefer to work and stay in Colombo or other main cities or leave the country. Under these circumstances, free education helped some poor people succeed in their personal lives, but not many benefits to the community. Free education has induced denuding educated intellectuals from Tamil-dominated areas. The trend and the process that existed during the golden era of Jaffna have now been reversed.

 Young and middle-aged people who live in the North today have been influenced by terrorist ideology and have experienced the sufferings of war for 30 years(dying in cold blood, the shock of bombs, firing and fighting, abduction of children to be trained as terrorists, living with fear, hard life). During this period, they have seen only the armed soldiers as “Sinhala people” and have not seen Sinhala civilians. Terrorists and non-governmental organisations who occupied the area during the war taught the children that ‘Sinhalese is a dangerous group of invaders who have come from somewhere to destroy Tamil country. For them, the word ‘Sinhala’ has a connotation of the enemy to be got rid of.

As discussed so far, the free education system introduced in 1945 has been followed by a series of subsequent reforms, which resulted in changes in the entire social fabric within 2 to 3 decades with many positive and negative results.

Positive Impacts

  • The adult literacy level of the country increased to 97% as of 2019, which is above the regional and world average
  • All parents realised the value of education, and children’s education became the highest priority of almost all families in the country.
  • Students qualified in secondary education (GCE- O/L and A/L) and University graduates are found in many rural areas, especially from low-income families, regardless of their caste, class, or ethnicity.
  • Inherent intelligence became the most important factor for acquiring knowledge and upward mobility in society and the economy, instead of ethnicity, caste, class, and wealth. Even a child of the lowest strata of society can now climb up to the top of professionalism.
  • The presence of Sinhala students in universities and public service increased rapidly. The Sinhala community progressively started acquiring the due share of opportunities they had lost during the colonial period. But the thirty-year war has brought disproportionate benefits to Sinhalese and lost the expected share of Tamils. While addressing the long-standing grievances of Sinhalese, it created a new set of problems leading to frustration and dissatisfaction among the Tamil community.
  • Rural youths found new avenues for more remunerative jobs outside the village without confining themselves to their parents’ low profitable traditional livelihoods. That contributed immensely to poverty alleviation.
  • With the Sinhala-speaking people in the public service and Sinhala being the official language, the Sinhala community felt more comfortable dealing with the bureaucracy, but Tamils found it challenging.
  • The transfer of technology at the local level became more convenient due to improved literacy and knowledge.

Negative Impacts

  1.  Even today, most secondary schools still need facilities and resources for science and technical education. Most educated youths, including university graduates, were qualified in humanities without employment-oriented knowledge and skills. Their expectation is white-collar jobs. But such opportunities are limited in the job market and create a high rate of educated youth unemployment. Every child and parent trusts that education is the only way to find decent employment. Unfortunately, what they have learned for many years does not help them to find such jobs.
  2. Since the late 1960s, educated youths’ unemployment has become a recurring social and political issue. This contributed significantly to the 1971 and 1987 Sinhala youth uprisings and fuelling the LTTE terrorism in the North of the country.
  3. Under this scenario, inter and intra-community completion has emerged for the limited job opportunities in the public sector and free university education. Elites observed an intense competition for their children from the educated youths of low-income families to enter public sector jobs. Also, sometimes, in competitive examinations, children of low-income families perform better, depriving the elites. The intra-community conflict was more prominent among Tamils, as elites were reluctant to compete with the oppressed segment of the society. Instead, they prefer to study in the USA or Europe.
  4. In addition to the competition within the community, the Tamil community, in general, faced extreme competition from the Sinhala Communitysincethe 1960s. When English was the medium of education and the official language, the Tamil community enjoyed a higher percentage of higher education, professions such as medicine, engineering, accounting, science, mathematics, and public service in general. Being less than 11 % of the total population, they were over-represented in many fields and played a dominant role in almost every aspect of governance. Under the reform agendas, the Sinhala community’s participation in all fields increased rapidly, resulting in the loss of opportunities that the Tamils had enjoyed for decades.
  5. Today, the Tamil community in the North and East has become less competitive and less represented in higher education and public service due to the 30-year prolonged terrorist movement.
  6.  Many Tamil students who performed very well In GCE (A/L) had been deprived of science-based university studies due to the language-based standardisation of marks for university entrance, introduced in the early 1970s. Though this short-sighted discriminatory policy was corrected within four years, the hostile attitude created against the Sinhala community is yet to be reconciled.
  7. After 1956, Sinhala became the official language, and public servants were compelled to be conversant in the Sinhala language. Some public servants from all communities who did not want to learn Sinhala started leaving public service. The vacuums created in such events were also filled by the Sinhala community resulting in a further reduction of Tamil presence in the public service.

Summary and Conclusion

Most National and International writers have interpreted that the Education sector reforms in independent Sri Lanka have been targeted toward depriving or harassing the Tamil minority.  But it is a gross misinterpretation of the good works done by successive governments to mainstream the country’s hitherto isolated and oppressed majority. Education in vernacular and changing the official language from English to Sinhala was resented by the affluent class of all ethnic groups (Sinhala, Tamil, Muslim, Burgher, Malay, Catholic, etc.) because they wanted to enjoy the benefit of independence by themselves without passing it to the poor and the oppressed majority of Sinhala, Tamil, Muslim, and Catholics. They wanted only to transfer the power from White Westerners to Westernised Browns. Westernised Sinhala, Tamil, and Muslim Elites wanted to use Sinhala/Tamil Speaking un-educated or less-educated majority to maintain a feudal system. According to the elites, the vernacular-educated orvernacular-speakinglot is not cultured (Godayas or Biyas). Vernaculars are to communicate with domestic servants. The voting against Act No. 5 of 1960 for the nationalisation of private schools by the then United National Party and Federal party is clear evidence.  Unfortunately, international writers do not hear the voice of the oppressed groups who have benefitted from the education sector reforms. They hear only the voice of the loser elites. 

The free education system and the government’s taking over private schools greatly benefited non-English-speaking, poor Sinhalese, Tamil, Muslims, and Catholics, who accounted for 90% of the country’s population.

Changing the official language from English to Sinhala did not negatively affect poor and ordinary Tamils because they did understand either Sinhala or English. As the medium of instruction had been changed from English to vernacular, changing the official language from English to vernacular was the need of the day. However, in 1956, Sinhala made the official language, ignoring Tamil, which is a severe mistake. But, compared to Tamil Nadu State in India, Sri Lanka has accorded higher recognition for Tamil as an official language and medium of education.

Early implementation of the Free Education Ordinance- of 1943 has done social justice to the poor of all communities and added immense value to their lives. However, accepting the vernacular as the medium of instruction has done irreparable damage to the education system and socioeconomic advancement of educated individuals and the country. Instead of changing to vernacular, priority should have been given to producing teachers who could teach in English at the inception. The vernacular should have been introduced as a subject.

Language-based standardisation was done purposely to increase the Sinhala student population in universities, especially for science-based studies, since most Sinhala schools did not have facilities for science education. However, it was implemented only for four years. Except that, all other reforms were targeted towards benefiting the country’s deprived majority (90%), regardless of ethnicity or religion. Number wise increased presence of the Sinhala community in higher education and public service is inevitable when equal opportunities are provided, as they are much of the country. It should have been understood as regaining rights by Sinhalese, which they had lost during the colonial period, and acquiring their due share as per the population size.

During the colonial period, schools were established based on religion, race, or language. The expansion of the number of secondary schools in 1960 was also preceded by the same line, paving the way for nurturing racialist ideologies since childhood. This is detrimental to national integration and nation-building. According to the above discussions, it is evident that the conflict was not much among ethnic groups but mainly between the privileged minority and the oppressed majority.

The Marxist political and economic ideology penetrated the Sinhala society in the 1930s and became more visible after the 1956 political change. Therefore, Sinhala elites could not openly resist/react against the reforms as social awakening had created solid political pressure. But well-educated and knowledgeable Tamil elites did not accept the defeat and gave an ethnic interpretation to all the above reforms. Tamil leaders mobilised oppressed and suppressed groups against the Sinhala-dominated governments. Interestingly, the problem of educated youth unemployment has been perceived/ interpreted in two extremely different ways by the two communities. While Sinhala Community understood it as a national economic problem, the Tamil community understood or wanted to understand it as a specific political problem related only to the Tamil ethnicity.

As a result of half a century-long struggle for an unwarranted issue, infused by traditional Tamil leaders (to regularise and continue disproportionate privileges enjoyed during the colonial period), the present generation of Sri Lankan Tamils has inherited numerous social and political, administrative, and economic problems. In contrast to the golden era of Tamils, they are now less competitive and under-represented in many aspects. According to several discussions I had with Jaffna, Kilinochchi, and Vavuniya in 20019, correcting these evils is the ‘reconciliation and accountability expected by the ordinary Tamils.

Concluded

Ethnic Conflict in Sri Lanka; Is it an Upshot of Free Education System? – Part I

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According to recorded history, the education system in Sri Lanka commenced after the arrival of Buddhism in the 3rd BC. Since then, it has evolved parallel to the expansion of Buddhism in the country.  This education system focused on studying religion (Buddhism) using Sanskrit and Pali languages and, to a lesser degree Hela Basha (as early Buddhist Commentaries or Hela Atuwa had been written in vernacular language). Subsequently, Sinhala became a medium of education in Privena (Buddhist Monasteries). However, like English in the modern world, Paali and Sanskrit were the elites’ languages and symbols of knowledge in the olden days. Ancient education was mainly targeted at Buddhist priests, Royal families, and nobles who were expected to be ruling class members. This education facility was provided by Pirivenas, primarily located on Buddhist temple premises, and teaching Buddhism was its main undisputed task. However, the knowledge required to maintain the socio-economic and political system of the day, such as astrology, medicine, governing principles, judicial matters, and military science, was also taught. Today, the Constitution of the Democratic Socialist Republic of Sri Lanka assures the right to universal and equal access to education to persons at all levels and eradicates illiteracy. The average adult literacy rate in Sri Lanka was 97% in 2019, above the world and regional averages. Sri Lanka has a very high unemployment rate among youths who have completed secondary and university education.

Modern Education System in Ceylon- Favouritism

Christian Missionaries introduced Sri Lanka’s modern education system in the 19th century during the colonial period. Missionaries became very active in education in Colombo, Jaffna, and a few other main cities, mainly located in coastal areas. Missionaries played a prominent role in education in Jaffna peninsula due to contributory factors such as:

  1. Relatively a high density of Christian/ Catholic population in the Peninsula.
  2.  Even before the British period, Portuguese and Dutch missionaries had started the modern education system in Jaffna to train people to spread Christianity and participate in the administration.
  3. Due to the scarcity of natural resources in the peninsula, Tamils considered education an alternative for economic well-being and prioritised it.
  4. Sinhalese and Muslims were more interested in agriculture and trade, respectively, and had little interest in government employment. Hence, they did not look at education as a means of income.

 After 1836, based on the recommendation of the Colebrook Commission, the British Government commenced the fee-levying English medium schooling system and established a few schools in the main cities. Those were limited to well-to-do people in central cities and people who could afford to attend those schools. Most Tamil and Sinhala ordinary children who lived in rural areas were deprived of English and secondary education. Education in vernacular was free due to government grants for recurrent expenses and the contribution of local well-wishers. Those schools were limited to primary and junior secondary education to improve literacy, basic writing, and reading skills. Therefore, students at vernacular schools had no opportunity for secondary education and higher education in English.

Under the colonial regime, Catholic and Christian communities enjoyed a privileged position in education. For instance, by 1939, while Catholics and Christians were only 6.3% of the country’s population, they received 73.7% of the government grants for Assisted Schools.  Schools for Buddhists, Hindus, and Muslims, who accounted for 93.7 % of the population, received only 26.8 % of government grants. English, the language of the colonial masters, was the language of administration. The primary purpose of the then education system was to produce the workforce required for the colonial administration, inculcate English cultural values, and increase the awareness of the British Empire among ordinary citizens.

Reputed schools established in Colombo were open to well-to-do people of all ethnic groups (Sinhala, Tamil, Muslim, Malay, Burger, etc.).  But, due to the locational advantage, Jaffna schools were catering mainly to the Tamil community, giving them a disproportional advantage. Under these circumstances, well-to-do Tamils enjoyed the lion’s share of the English, secondary and higher education, including medicine, law, and science.  Also, the official language of the government was English. As such, middle and senior public service positions were also staffed mainly by Tamils, significantly exceeding their proportion of the total population. For instance, “in 1956, eight years after the independence, Tamils constituted 30% of the administrative panel, 50% of the clerical personnel of the railways, postal and custom service; 60% of the doctors, engineers, and lawyers; 40% of the armed forces, and 40% of other labour forces”.( The Ethnic Conflict of Sri Lanka: A Historical and Social Outline- SasankaPerera), while their share of the population in the country was less than 11%.   However, it should not be interpreted that the entire Tamil community benefitted from the then education system. Due to social stratification, the lower strata of the Tamil community were denied even free primary education. If at all, Sinhala and Tamil-educated ordinary people could join public service mainly as minor employees. Yet, Sinhalese did not wish to join many categories of government jobs (as minor employees)that were available according to their educational qualifications but did not match the social status enjoyed as farmers.

Although English was the official language, the Tamils had a minor advantage over the Sinhala community as most of the bureaucracy could speak some Tamils. If Sinhala people were to communicate their grievances to the bureaucracy, they depended on petition writers to write in English. During the colonial period, the ordinary Sinhala majority did not have the resources and opportunity to compete with the Tamil minority in public administration. Sinhala community understood it as domination by the Tamil minority over the Sinhala majority and looked enviously at the success of the Tamil minority. They could not see it as a problem of the colonial governance and education system, known as divide and rule. Until the 1960s, Sinhalese kept complaining about the Tamil over-representation in public service, especially in high-level professions such as medicine and engineering. Before the 1970s, Tamil overrepresentation in universities, especially in medicine, engineering, and science, was a primary grievance of the Sinhala community. According to the University entrance system, “Those who scored highest gain access to different faculties in universities irrespective of their district from which they came. While there was no bias inherent in this system, Tamils from Jaffna and Colombo did particularly well. For example, in the 1969-1970 intake to science and engineering courses, Tamils accounted 35%, while they accounted for over 45% of the intake of engineering and medical faculties”.  (The Ethnic Conflict of Sri Lanka: A Historical and Social Outline-SasankaPerera)

Free Education for All

The people of the then Ceylon got a reasonable share in the governance of their own country under the Donoughmore Commission Reforms in 1931.  Under these reforms, Sinhalese, the majority population, got more political power than other communities. Against this backdrop, they launched various campaigns to wield the power of Sinhala politicians to get a due share in education and public administration.

Under DrC.W.W.Kannangara, the Executive Committee on Education of the State Council of Ceylon took the initiative to establish a free education system for all. Based on the recommendation of this committee, the Free Education bill was introduced in the State Council in 1943, and approval was granted to implement it effective from 1st October 1945. According to this, every child above the age of 5 is entitled to free education irrespective of class, caste, or ethnicity. Also, the Language of instruction was made the SWAHBASHA (mother tongue). The decision to teach in the mother tongue may have been taken because the country lacked the capacity and resources to provide universal and equal access to education at all levels in the English medium. At that time, only about 7% of the population was literate in English. But the country had adequate capacity to provide education in vernacular. Also, both Sinhala and Tamil were well-developed languages used as mediums of instruction for oriental studies. Many people, as a passion or due to ignorance, blame S.W.R.D. Bandaranaike for changing the medium of instruction from English to Sinhala, but he has nothing to do with it. However, his patriotic movement created more enthusiasm for Sinhala as it was the official language. The use of Vernacular in secondary education was a baby of Kannangara, introduced along with the Central College system. Accordingly, changing the medium of instruction from English to vernacular in universities necessitated an automatic process during the Bandaranaike period.

Secondary Education for Rural Poor

The system of Central Colleges, introduced by Minister Kannangara, was commenced and modelled on Colombo Royal College. The program was to establish one such school in each electorate with hostel facilities in different areas of the country outside main cities but in central locations to provide secondary education in Sinhala and Tamil mediums. At the inception, students at Central Colleges were given a good English education, enabling them to proceed with higher education in English. The initiative of Minister Kannangarawas a turning point and a revolutionary step in the Ceylon education system, which was hitherto limited to the well-to-do people of the main cities. The system was further strengthened by providing scholarships to study in central colleges for poor but clever students of remote primary and junior secondary schools, enabling them to cover the cost of food and logging, clothes, textbooks, etc. As a result, many Sinhala and Tamil students in less privileged areas and less privileged families got secondary and higher education opportunities. The free education system and the establishment of the central college system reduced the imbalances in ethnic composition, rural-urban composition, and rich-poor composition in secondary and higher education and public service to a certain extent. However, the number of such schools was limited to 54 and could not significantly change the existing ethnic composition of the enrolment in Secondary and higher education and public service. As the public service was rapidly expanding, this marginal increase in educated people did not affect the Tamil and Sinhala elites. Hence there was no visible objection to the reform.

Free Education for AllBecameAReality and A Responsibility Of The Government

Assisted Schools and Training Colleges (Special Provisions) Act passed in 1960; was an Act that enabled the government to take over the ownership and management of many schools and training colleges managed by non-governmental organisations and private parties.  There was a big protest by the catholic organisation against the takeover of schools by the government. But the poor segment of the Catholics supported the move as their children would benefit immensely from the free education system. The Act was passed in the parliament with 60-member majority votes. However, United National Party and Federal Party, which represented Sinhala and Tamil elites voted against this Act. Under this Act, the government took over many schools that belonged to the Catholic Church in Sri Lanka and schools that the Buddhist Theosophical Society managed. After implementing the above Act, the Free Education Ordinance- of 1943 became a reality. It practically ensured free education for all Sri Lankan children in their mother tongue, regardless of ethnicity, class, caste, and other socioeconomic differences. Since then, free education has become the government’s responsibility and children’s right.It ensures free education for any Sri Lankan child from kindergarten to a university degree. This means that every Sri Lankan, by birth or registration, endows full insurance coverage for education.

Along with these initiatives, in addition to the hitherto existing limited number of Central Colleges,manyMahaVidyalayas (like central colleges but without hostels) were established/upgraded all over the country, catering to all rural areas to teach up to the university entrance level in the mother tongue. To facilitate this process, the medium of instruction in universities also changed from English to the mother tongue (Sinhala and Tamil). Also, before this, two new universities Vidyodaya and Vidyalankara) were established, which enabled it to accommodate the increasing number of undergraduates coming from newly established Mahavidyalayas.

Equal Access

Before the 1960 forms, most poor Sinhalese, Muslims, and Tamils were educationally backward.In the early 1960s, parallel to the expansion of Sinhala and Tamil Schools for secondary education, the number of Muslim schools increased for primary and secondary education. The minimum academic qualification to recruit teachers during this period was GCE (O/L). But the Muslim community did not have an adequate number of people with minimum qualifications then. The minimum qualification criteria were relaxed in appointing teachers to Muslim schools to overcome this vacuum. Without the said special preference, it would have been impossible to trigger off education among poor Muslims.

However, at the inception, there was no adequate number of qualified teachers and other facilities in newly established/upgraded MahaVidyalayas.Therefore, the quality of education in these schools was much lower than in Central Colleges and reputed urban colleges. Further, most of these schools did not have facilities for science education. As such, university entrance from these MahaVidyalayas was limited to arts streams. They could not send students to universities to be qualified as doctors, engineers, scientists, accountants, or other professionals.

Educated Unemployed Youths as a Pressure Group

Regardless of various constraints, many students from less privileged areas and families became graduates qualified in art subjects. Most of them could not find gainful employment according to their expectations. Though university education is free, students who entered universities from low-income families were faced with numerous problems in financing the cost of food and lodging, transport, teaching aids, etc. Very often; their parents were indebted to fund those expenses and compelled to compromise the education of other children in the same family. Towards the late1960s, there was a large backlog of unemployed graduates. They became a dynamic and knowledgeable but frustrated lot, creating a new socio-economic and political problem. This was a more serious issue among the Sinhala community than among the Tamils. Still, the Tamil elites enjoyed a significant share of science education. As such, they felt the problem very little and were not bothered about the unemployment of art graduates from less privileged families. Moreover, due to the solid social stratification in the northern area, unemployed Tamil graduates did not have a social environment conducive to becoming a powerful pressure group to bargain with politicians or the government for jobs. They were voiceless at the regional as well as national levels. Even in those days, Northern politicians did not live in their constituency with the community, and there was a wide gap between political leaders and constituents. Despite that,Tamil political leaders did not want to see and did not allow the youth to understand that unemployment among educated youth is a national problem. Instead, they interpreted it as discrimination against Tamils and an ethnicity-related issue. They used the national crisis to justify a separate Tamil Country within Sri Lanka.

However, unemployed Sinhala graduates agitated against the then government, requesting a resolution for the graduate unemployment. They became an organised major political force in the late 1960s, and their pressure on the political leaders increased. During the 1970 General election campaign, United Front, led by Sri Lanka Freedom Party, pledged to resolve this burning socio-economic issue if they came into power. Against this backdrop, that party was supported by unemployed graduates, parents, and university academic staff. United Front won the general election and came into power with an overwhelming majority. Meanwhile, the Tamil leadership was preparing their youths to agitate for a separate state to resolve core problems, including unemployment.

To be continued

Sinhalese: A Nation Comfortable in Isolation – Part 2

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13 mins read

In part one historical and anthropological factors were discussed to understand their relevance for the present ethnic crisis in Sri Lanka and encourage racial-minded extremists to think differently to achieve ethnic harmony. The detrimental effects of deep-rooted mythical stories and self-centred political ideologies are discussed below.

Effects of Indo- Aryan Notion

A significant part of South India is populated by Ethno-linguistic groups of Dravidian origin, such as Telingu people of Andra-Pradesh and Telangana, Tamil of Tamil Nadu, Malayalam of Kerala, Kannadigas of Karnataka, etc. Also, Singapore and Malaysia have a sizable Tamil population outside India. The World Tamil population is well above 80 million. Further, many Dravidian people, including Tamils, were taken out for bonded labour by colonial authorities or migrated to many parts of the world during the colonial period. As such, the Dravidian population in India and the rest of the world could be more than 250 million. They are a recognised socio-economic and political power with a unique identity in India and many parts of the world today.

Though Sinhalese have been labelled as Aryans, no so-called Aryan Nations or Ethnicities have recognised Sinhalese as a nation that belongs to their racial group. Contrary to that, Sri Lankan Tamils are recognised, accepted, and supported by all Tamils in India and other parts of the world as members of their families.  The wider Dravidians family scattered in many parts of the world also accepts Sri Lankan Tamils as Dravidians.

Sinhalese are genetically different from Indo-Aryans but look much closer to Dravidians in South India. Nonetheless, Sinhalese are wilfully alienated from the much larger Tamil and other Dravidian racial groups due to mythical beliefs and artificial labelling as Indo- Aryans. Consequent to this hypocrisy, Sinhalese became a negligible, frustrated, and isolated minority among the Dravidian groups of South India and Dravidians in the rest of the world.

Sinhala Mentality

Throughout history, Sinhalese suffered the feeling of a minority in the Indian Sub-continent due to several Dravidian Nations with a large population at their doorstep, South India. Sinhalese always lived with the fear of South Indian invasions, especially from Tamil Nadu. Ordinary Sinhala citizens do not see a difference between Sri Lankan and Tamil Nadu Tamils and other Dravidian ethnicities from South India. Therefore, Sinhalese are accustomed to labelling anybody from South India as Tamil. For the 2500 years of recorded history, up to the European colonisation, ‘Sri Lankan History’ means nothing else but playing the defensive role against invaders of South Indian kingdoms. Even today, the above feelings and notions are deep-rooted in the minds of Sinhalese and scared of Tamil domination and aggression in other forms. This fear is reasonable from a historical perspective.

Original Sinhala kingdoms, Anuradhapura and Polonnaruwa, had the best land to cultivate staple food but were abandoned by Sinhalese due to intermittent invasions and colonisation of those regions by Tamil invaders from South India. After losing the Polonnaruwa kingdom, the Sinhalese were forced to cramp into the less fertile hill country and southern wet zoon, which are unsuitable for paddy cultivation. As such, the North and East Tamil Homeland has little validity. It has happened as a historical process after the falling of the Polonnaruwa Kingdom and subsequent invasions by South Indians and Europeans. Therefore, Sinhala Buddhists will never agree to forget the great population centre of the golden era of Sinhala Buddhist civilisation and accept the new concept of Tamil homeland in the North and East. That will antagonise the Sinhala –Buddhist community and widen the ethnic gap.

Co-existence

Ancient Sinhalese rulers had different strategies to face the threats from Southern Indian kingdoms. As much as possible, while maintaining the identity of Lanka as a separate country from India and the identity of Sinhalese as a unique nation, they kept the goodwill, socio-economic and political relationship with different South Indian kingdoms (Dravidian) as a national security strategy. Sinhala kings used to seek military assistance from Dravidian kings whenever there was an invasion by another Dravidian king in South India. They never depend on the large Aryan kingdoms of North India for that purpose.  Inter-marriages between Lankan and South Indian Royal Families were another critical strategy followed during those days to maintain regional solidarity. In several instances, Sinhalese have accepted South Indian Princes as claimants for the Sri Lankan/Sinhala throne through hereditary marriage relationships. Sinhala Kings of Pandiyan Origin (Prakramabahu the Great, Nissankamalla Etc.) have ruled the Sinhala country without dispute about their Dravidian origin. Sinhalese kings also supported some South Indian kings to get protection from their rival opponents of neighbouring kingdoms. Also, they had enrolled well-recognized dignitaries and experts from south Indian Kingdoms in the government administration and various development works, enhancing cooperation and understanding.

After the collapse of the Polonnaruwa kingdom, Sri Lanka became politically weak and unorganised and could not face any foreign g invasion. Vijaya Nagar kingdom was established in 1336 and became a powerful kingdom in South India. Up to the European invasion of the Indian Subcontinent, the Vijaya Nagar kingdom protected South India, including Sri Lanka, from Islamic Invasion. If not for the powerful Vijaya Nagar Kingdom In south India, Sri Lanka could have been subjected to Islamic invasion resulting in conversion to Islam. Intentionally or unintentionally, the Vijaya Nagar kingdom has played a vital role in safeguarding the Sinhala-Buddhist identity in Sri Lanka.

Hypocrisy

Sri Lankan Tamils are very proud of their nationality, language, culture, and religion. They believe they are a branch of the Dravidian family, the oldest civilisation globally and superior to Sinhalese. They are unique in observing cultural values at family and community levels and exhibit the national identity by conduct, behaviour, and appearance strongly and openly. Contrary to this, Sinhalese believe they are a group of Indo-Aryans, and Tamils are non-Aryans and rank below the level of Aryans in nobleness. Therefore, Sinhalese are superior to Tamil. Extremists of both communities use these Tamil and Sinhala hypocrisies to widen the gap, fuel the mistrust, keep the reins in their hands, and manipulate racialism to satisfy their agendas.

Isolation

 Conflicts, competition, friendship, love, and hate between Sinhalese and Tamils have been common throughout history. But it was intermittent and limited to Lanka and a few kingdoms of south India. The Sinhalese are a minority ethnic group in the Indian Sub-Continent, struggling with a significant Tamil Population in South India (next door) to survive as a separate nation with a distinct identity and a particular territory (Lanka Island). During the colonial period of Western powers, there were no invasions by southern Indians. But Tamils and other minority groups became more prominent than the Sinhala majority. After independence, Sinhalese are trying to regain lost opportunities during half a millennium-long colonisation period. But their strategies seem very much based on historical memories, without considering the social, political, and economic evolution that took place during the colonial period and the changes in the new world.

The master minders of the 1983 black July have branded the entire Sri Lankan Tamil community as terrorists fighting for a separate country or supporters of separatism. Also, in local and international media and government literature, the word ‘Tamil and Dravidian’ is synonymous, especially in the Sinhala language.  Most of the Dravidian ethnicities in India are not sympathisers of the Tamil course in general or the Sri Lankan Tamil in particular. But by using the words Dravidians and Tamils synonymously, an inference has been established that Dravidians are being harassed/discriminated against by the Sinhalese/Sinhala-dominated governments in Sri Lanka. Therefore, a substantial Dravidian population has become sympathisers for the Sri Lanka Tamil course, regardless of the validity of a separate Tamil country. Repercussions of the issue expanded beyond the boundaries of Sri Lanka and Tamil Nādu and got it internationalised, while Sinhalese are losing Tamil friends worldwide.

In addition, Sinhala patriots have recently started using the word ‘Sinhala- Buddhist’, creating a sub-ethnic group within the Sinhalese. If they used the word ‘Buddhist,’ it could have enlarged the frontier by enlisting the sympathy of the larger Buddhist population of the world, as the Tamis do. At least if they had used the word ‘Sinhalese,’ much of the Sri Lankan population (75%) could have been retained in the lobby. But using the word ‘Sinhala- Buddhist,’ Sinhala Frontier became small. While LTTE has strategically expanded their network to the Indian subcontinent and the rest of the world, Sinhala patriots are trying to be an isolated smaller group within Sri Lanka.

Under the above circumstances, Sri Lanka has miserably failed to prevent the dissemination of misinformation and prove that the demand for a separate country is unwarranted. Instead of putting the correct facts on the table and demonstrating the commitment and genuineness for co-existence, the Sinhala camp continues to deny the allegations put forward by separatists before the international Tamil sympathisers and justify the LTTE demands.

Under these circumstances, Tamil patriotism became highly relevant and acceptable to much of the world community, while Sinhalese’s sincere attempts and patriotism became unacceptable, isolated, and voiceless.

Swimming the Upstream

As discussed above, there are no tangible or visible social and cultural issues between the two communities to fall apart. Probably this conflict is due to the competition for limited economic opportunities. After the independence, both communities wished to exploit the available narrow economic base (small piece of cake) for the benefit of their communities instead of working together to widen the economic base (make the cake bigger). Against this backdrop, after the independence, a serious animosity with deep-rooted dislike has developed between Sinhala and Tamil communities, especially among political leaders. Gradually this has escalated into an armed conflict between Tamil Tigers, backed by some external forces, and the Sri Lankan government, supported by the Sinhala majority. The government militarily defeated this conflict in 2009. However, now socially and politically, this difference and hatred have become more severe.  It is a politically induced scenario staged by power-hungry politicians of both communities. Their weapons include the fabrication of news favourable for conflicts, misinformation, generalisation of isolated incidents, and exaggeration of sensitive information related to ethnic issues. That is to maintain an emotionally energised society ready to fight with the opposite community, keeping the said politicians in frontiers with reins in their hands.

By this time, most of the core ethnic issues have been resolved by the government legally and constitutionally (devolution of political power, acceptance of Tamil as a national language like Sinhala, development of infrastructure, and provision of welfare facilities without communal or regional discriminations, investment to reduce regional disparities, etc.). However, in general, Sinhalese people are not interested in providing equal opportunities to Tamils. Therefore, the administrative implementation phase of constitutional and legal provisions is prolonged, leading to dissatisfaction among ordinary Tamil people. Tamil politicians also have a very aloof attitude towards seriously implementing such legal and constitutional provisions to do justice to ordinary Tamils who have been suffering for more than three decades. They are happy to sustain a suffering Tamil community in Sri Lanka to justify grievances at the international forums and seek asylums for the well-to-do Tamils in advanced countries for a better standard of living. Therefore, most of the expressions of ethnic conflicts taken into the platform by Tamil politicians looked more like symbolic demands and picked isolated issues attractive to international forums than a representation of deep-rooted core structural issues of the ordinary Tamil people.

Way Forward

  • Sinhala Frontier

If Sinhalese maintains that they belong to Indo–the Aryan race and are entirely different from Tamils and other Dravidian groups and superior to them, the conflict will continue. It is detrimental to the co-existence with the large Tamil and Dravidian populations next door, South India. To ensure the sustainability of Sinhala Jathiya (Sinhala Nation), Sinhala Extremists must understand the world’s reality and investigate the ways and means for co-existence with the Tamils in Sri Lanka instead of suppressing them.  Sinhalese must stop pushing the Sri Lankan Tamils, world Tamils, world Dravidians, and their advocacy groups to a broader frontier of enemies. They must realise that world sympathy has been cultivated in favour of Sri Lankan Tamils and un-sympathy against Sinhalese. It may not be based on correct facts, but it can’t be changed or brought back history through an arrogant and adamant approach or counterarguments. Instead of harping on ancient Sinhala glory, solutions shall be sought based on the present demographic, social, political, and economic structures.

  • Tamil Frontier

Traditional Tami leadership and diaspora should be more concerned about the burning issues of the poor Tamils who live in Sri Lanka and co-exist with Sinhalese instead of harping on the hidden agenda of a separate Tamil country within the small island. Instead of widening the gap between the two communities, they must investigate how they can co-exist with Sinhalese in Sri Lanka. Tamil leaders’ priority must be rehabilitating the war-affected people and areas, correcting past mistakes and injustices, and assisting them in rejuvenating their lifestyle with the assistance of the government.

Next, they must use the devolved political power and the national political representation to benefit Tamils to the maximum possible extent and prove their commitment, integrity, genuineness, and ability for democratic governance. Then request for devolution of power further to fill gaps, if any.  They must understand that any rights lost by Tamils can be availed only by the Sri Lankan government. Also, they should not expect to regain the privileges enjoyed during the colonial period. Base-less concept of the North and East Tamil homeland, which leads to widening the gap between Tamils and Sinhalese, should be dropped from their demands. Entire Sri Lanka is the homeland for all citizens of Sri Lanka. The LTTE has distorted the unique Tamil Hindu culture of Sri Lanka, and the young generation of the Tamil Diaspora is further distorting it. If they do not change their minds to live with Sinhalese cordially, it is detrimental to the sustainability of the unique Tamil-Hindu culture of Sri Lanka.

  • Diaspora

The diaspora is using legally or illegally earned huge assets abroad to cultivate hatred among the young generation, who doesn’t know what has happened in history. Instead, they Should invest in the North and East of the country to generate more employment for their people and to remove the misunderstanding between the two communities. Cultivating hatred among young and future generations of both communities will close all avenues for reconciliation and co-exist forever. It may create another Palestinian- Israel situation on this earth.It is very pathetic, even 14 years after the war; the priority of the Tamil leaders and the international community is illusive accountability, not the issues of the war-affected people. Accountability will satisfy the hateful minds of a limited crowd but not the needs of ordinary Tamil who have suffered for about four decades. The lack of focus on the well-being of the affected people is an obvious indication of the deceitfulness of all parties involved in the accountability agenda. If they are genuine in this process while following the accountability mechanism, very high priority must be placed on the rejuvenation of the economy and lifestyle of the war-affected people on par with the rest of the country instead of allowing them to suffer for many more decades.

  • International Community

Accountability has no meaning if the parties involved /responsible for the action can’t correct/ compensate for the ill effects of their actions.  According to UNHCR s Operational Guidance on Accountability to the Affected People, “accountability to affected people is a commitment to the intentional and systematic inclusion of the expressed needs, concerns, capabilities, and views of persons of concern in their diversity; and being answerable our organisational decisions and staff actions in all protection, assistance, and solutions, intentions, and programs “. As such, without limiting to one party or aspect, the accountability should apply to all stakeholders, including the international partners and cover all aspects.  Accountability should not be narrowly defined as punishing a person or a group for satisfying the hidden agendas of some groups with vested interests.

After the Civil war, even hard-core Sinhala patriots started developing sympathy, compassion, and friendship toward Tamils. Ordinary Tamil people had shown interest in living in Sinhala areas with Sinhalese and rejuvenating their lifestyle and livelihood with the government’s support. The hard-core terrorist also accepted the rule of law in the country and integrated into civilian life after the rehabilitation.  Even traditional Tamil political leaders working for a hidden agenda of a separate Tamil country became more lenient towards the concept of one country. Though they did not participate in the government’s rehabilitation efforts, they kept neutrality without disturbing it.

As such, an environment conducive to a long-lasting solution emerged slowly after the war. However, the unwarranted involvement of UNHCR reversed the whole process at its inception. At present, their cause of action is counterproductive. It gives an unwarranted expectation and confidence for a separate Tamil country, which is the hidden agenda of traditional Tamil political leaders. Also, it cultivates hatred in the minds of the second and third generation of Tamil Diaspora based on a fabricated and unfounded allegation of the Tamil genocide, which will close all available avenues for reconciliation and co-existence forever.

Artificially sympathetic international community towards the Tamil course should understand the above realities and Sinhalese mentality. Undue pressure on the Sri Lanka government will increase the suspicion, hatred, and gap between the two communities resulting in more suffering for ordinary Tamils who live in Sri Lanka. The UNHCR and the UN should be able to put pressure on both the Government of Sri Lanka and the powerful, influential, and adamant Tamil Frontier for reconciliation and co-existence.

Conclusion  

Suppose Prince Vijaya’s legend’s embroidery is removed away. In that case, the core could be that a prince from Odessa or the Bengal region of the Indian subcontinent had invaded Lanka and unified it as one country and one nation in the 6th century BC. Over centuries it has evolved as Sinhala Nation (Sinhala Jathiya) and Sinhala Country (Sinhale). Since then, socio-economic immigrants from South India would have been assimilated into Sinhala Jathiya (Sinhala Nation).

Lanka being an island, its language, the ‘Sinhala’, may have evolved as a unique language as a mixture of local dialects, the language used by Vijaya and groups, and the Tamil language used by their spouses came from Madurai. Subsequently, it may have been enriched from North Indian languages due to the influence of Buddhism and eventually shaped as an Indo-Aryan language. Genetically Sinhalese are not Indo-Aryans. They are a mixture of Indo-Aryans, Dravidians and indigenous people and are genetically closer to Tamils.

Though the war has been concluded by defeating terrorists, the conflict has escalated more than before and is escalating further. Entire processes, including the Hippocratic attitudes of Sinhala/Tamils and their racialist pressure groups/advocacy groups, have caused irreparable damage to both Sinhala and Tamils and blocked the avenues for ethnic harmony.

In this rapidly changing world, the Sinhalese must change their thinking patterns, attitudes, approaches, and behaviours, as mentioned earlier, to ensure the sustainability of the Sinhala nation, which they fought for more than 2500 years. The priority of the Sri Lankan government should be ethnic harmony, national integration, and building Sri Lanka as a nation while enjoying the rights and identities of different ethnic and religious groups. The diaspora and international forces should genuinely cooperate with the government in its efforts for national integration and nation-building for the best interest of Tamils living in Sri Lanka. I am concluding this article with the following remarks.

“Sinhala people are fond of Tamil Films, Tamil dances, Tamil Songs, Tamil music, Tamil foods, Tamil costumes, Tamil professionals, Tamil workers and Tamil girls, but they don’t like the Tamils. The Tamil people live, eat, sleep, work together with Sinhalese, and depend on them for livelihood, but hate the Sinhalese.”

References:

  1. Mahawamsa
  2. Cultural Survival Quarterly Magazine – December 1988; Conflict and Confusion in Sri Lanka
  3. Yes, the Sinhalese have their origin in Bengal Odisha. By Adriya Roy Couwdhury
  4. Sinhala People- Wikipedia
  5. Genetic Affinities of Sri Lankan Population- by Gautam Kumar Kshatriya

Sinhalese: A Nation Comfortable in Isolation – Part 1

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According to Mahawamsa, the primary historical chronicle of Sri Lanka, the Sinhala race has a lion ancestry. Suppadevi, the daughter of King Vanga Desha, was kidnapped by a lion, and they lived in a cave in a forest of the Lala region and gave birth to 2 children (Singha Sewalee and Singha Bahu). When Singha Bahu was grown, he escaped from the lion and came to the ancestral kingdom with his mother and sister. Later he moved to his birth area and established a new kingdom called ‘Sinha Pura’ and was crowned and named ’King Sinha Bahu’’. Prince Wijaya was the son of King Sinha Bahu.  Due to the notorious behaviour, Prince Vijaya and his followers embarked on a ship and were exiled by king Sinha Bahu. After some time, they landed in Thamraparni (Mannar), in Lanka. According to the above chronicle, the Lord Buddha passed away in North India on the day Prince Vijaya landed in Lanka.

Subsequently, Prince Vijaya married kuveni, the then-reigning Queen of the country. She belongs to the Yakkas Clan/ tribe, apparently the dominant clan of the day in Lanka. With the assistance of kuveni, Vijaya defeated the Yakkas’ power and became the first whole Island king of Lanka. Other clans/tribes could have assimilated with the Vijaya’s Kingdom. According to Mahawamsa, Sinhala Nation (Sinhala Jathiya) is descending from King Vijaya and his followers. Based on this story and human classification done by western scientists in the 18th century, another notion has been developed to say that Sinhalese are of Indo-Aryan origin, assuming that Vijaya is from Indo- Aryan origin and Sinhalese are decedents of them.  According to this Human race classification, Dravidians were considered a different ethnolinguistic group outside the Indo-Aryan family. This notion has created many negative impacts on Sinhalese in the recent past, mainly causing artificial segregation from South Indian Geopolitical reality, significantly distancing from Tamils and the wider ethnolinguistic group of Dravidians, which will be discussed later.

If the above story developed by Lankan chronicles and subsequent additions by western human race classifications is substantially true, the following are the possible realities, inferences, and occurrences.

(a)The ‘Lion’ in this story could not be an animal, but a beastly outlaw called ‘Lion’ like Robin Hood or Uthuwankande Saradial, who used to rob traders and live in the jungle.

(b)  The departure/expulsion of Vijaya should have happened from Bengal, Orissa, or any other coastal area in India as a ship has been used.

(c) If the Ship was floating/sailing without a definite idea of the exact destination, considering the wind direction and the proximity, the ship should have been standard in Andrapradesh, Tamil Nadu, or any other place of mainland India.

(d) If the ship had been further floated towards Lanka, it should have standard /sailed into Trincomalee, Kirinda, Hambantota, Godawaya, Galle, Beruwala, or any other place along the East or South coast, considering the wind direction and the proximity.

(e)  Getting stranded in Thamraparni (Mannar) by going around Lanka Island towards the north, against the wind direction of these months, is the least possibility.

(f) Instead of anchoring/getting stranded at any of the convenient ports/coasts mentioned above, they would have planned to reach Thamraparni port (Mannar) because it was the Capital Region of Queen Kuveni, the queen of the relatively powerful Yakkas Kingdom of the day.

(g) The most probable scenario is that King Sinhabahu could have planned to invade Lanka, which was then politically disorganised. He could have sent an army headed by his mischievous sun Vijaya for this planned errand.

(h)Considering the wind direction from the Bay of Bengal, Vijaya’s army would have departed in the First Inter Monsoon (March-April) to reach the southern sea of Lanka and use the very early part of Southwest Monsoon sail to Thambapanni on Vesak Full Moon Day.

(i) It is widely accepted that one Mural at Ajantha Caves elaborates on Prince Vijaya’s arrival in Lanka. If that is the case, said mural doesn’t give any impression of sending into exile or a miserable stranding in Thamraparni.  It looks like a well-armed and well-organized march comprising ‘Chathrangani Sena’ [Eth (elephants), Us (horses), Riya (carts), Pabala (pedestrian)]. It gives an impression of a well-planned invasion.

(j) By examining various stories in Mahawamsa, including the perception of 3 visits of Lord Buddha to Lanka, it can be assumed that Lanka had been ruled during this period by several clans/tribes of Yakkas, Nagas, Rakshas, etc. After defeating Yakkas, Vijaya may have unified the whole of Lanka and become ‘All Island King’.

(k) In honour of Prince Vijaya’s parents and grandparents, the new kingdom would have been named ‘Sinha-Desha’ (land of the Singha Clan). It is logical to assume that way, as his father’s new kingdom was also called “Sinha Pura.”

(l)The name Sinha -Desha may have changed from time to time according to various writers as Sinhala- Desha, Sihala- Desha, Sinhala- Deepa, Hela Diva, Helaya, etc. and colloquially as ‘Sinhale’ or ‘Helaya’. Also, it is essential to note that before the British period, it was called ‘Sinhale,’ and the chieftain of the county handed over a country called ‘Sinhale’ to the British.

(m) People who lived in ‘Sinhale’ could have been known as ‘Sinhala people’ or ‘Sinhalayo,’ and the language they spoke could have been called ‘Sinhala’ language or ‘Hela Basa’, which is like France, French people and French language or Germany, German people, and German language.

(n) Mahawamasa gives the impression that Vijaya and his followers are a Sinhala people who came from Singapura and accidentally landed in Lanka and settled down here and formed a new regime and a new nation called Sinhala. This is like the case of English people going from England and settling in Australia or New Zeeland. If the story is so, Singapura, the motherland of Sinhalese, should have been a vast Sinhala state in modern India, like the English people in England. But even a single native Sinhala person cannot be found anywhere in India today. As there is a significant Tamil population in India (Tamil Nadu), it can assume that the Tamils of Lanka have come from nearby Tamil Nadu in India. Since there is no native Sinhalese anywhere in India, it is impossible to believe that Sinhalese are a group of migrants from India. It seems like a mythical story.

(o) According to Mahawamsa, Load Buddha had three visits to Lanka, and the first visit was nine months after the attainment of Buddhahood. The Lord Buddha may have placed a high priority on Lanka as it was a human settlement with a rich culture, like the Buddhist Region in India.

(p)According to Mahawamsa and contemporary Indian Epics, Lanka was occupied by tribal groups or clans called ‘Yakkas, Nagas, Devas, and Rakshas. They could be aborigines, immigrants, or a mixture of aborigines and immigrants from the Dravidian Ethnolinguistic cluster of South India, including Tamils. Probably, the Nagas could be the migrants of Tamil origin who came as traders or fishermen because the snake (Naga) is very much related to Tamil culture. The above tribal names would have come according to their jobs and religious traditions.

(q) Most probably, after the establishment of Vijaya’s kingdom, most ethnic groups, tribes, and clans would have accepted the new colonial ruler and gradually assimilated into one nation called “Sinhala,” including the Vijaya’s Royal Clan.

(r) Perhaps the Veddas, who remain still with a separate identity, maybe the decedents who did not wish to assimilate with the new Sinhala Nation formed by Vijaya. Similarly, some hardcore Tamils (Dravidians), who lived before Vijaya’s arrival, may have maintained a separate identity without assimilating into the new nation formed by Vijaya.

(s) There is no debate about the fact that Sri Lankan Tamils are of South Indian origin. There is no significant difference between Tamil Nadu Tamils and Sri Lankan Tamils. Their traditions, customs, language, and religion are similar, and the relationship between the two groups remains uninterrupted throughout history.

(t) If Sinhalese have come from Odessa or any other Sinhala state in India, they should have maintained a cultural and political relationship with that state like the Tamils do. Under this scenario, it is logical to assume that Sinhalese had not come from any other part of the world. Vijaya, the Indian invader, formed a new nation called ‘Sinhala’ by integrating or assimilating his followers and spouses with all community groups living in Lanka at that time. Since then, immigrants from the Indian sub-continent could have been assimilated with the leading ethnic group called ‘Sinhala.’ Sinhala Language may have evolved by mixing with native languages used by Yakkas, Nagas, Devas, and Rakshas with the languages used by Odessa and other Indian invaders, and subsequently Pali and Sanskrit, mainly for written language.

Concept of Aryans

(a) Accepting the human race Classification done by the modern western scholars/ scientists, who were interested in oriental studies in the 18th century, supports the assumption that Vijaya and his followers came from present Odessa/ Bengal and are also Indo-Aryans. Therefore, a notion has been built to say that Sinhalese, the decedents of Vijaya, are also Indo-Aryans. The Indo-Aryan concept was developed in the 18th Century. Therefore, the Aryan concept of Sinhalese may have developed since the 18th century.

(b) All scientific studies by Indian and other international scholars agree that there is a significant relationship between Sinhalese, Bengalis, and South Indian Tamils. Further, there is a significant genetic relationship between Sri Lankan Tamils and Sinhalese compared to other south Asian ethnicities. Also, a study by G.K. Kshatriya in 1995 assessing the ‘Genetic Affinities of the Sri Lankan population has found that a significant genetic contribution has come from South India, the Bengali, and Vedda populations. Also, according to these scientific studies, Odessa people are genetically closer to Dravidians than Aryans. According to the above analysis, Vijaya and the group could be a mixture of Aryans and Dravidians.

(c) Further, if Vijaya and his followers were Indo-Aryans, they may not have gone to Pandu King in Madurai (the Tamil country) to bring the queen and wives for the followers. In any case, even if we accept that Sinhalese are decedents of Vijaya of the Aryan race, by marriages mentioned above, their second generation, the ‘Sinhalese,’ should be a crossbreed of 50: 50 with Dravidians and Indo- Aryans. If Vijaya and their followers were crossbreeds of Dravidian and Indo- Aryans, the genetic contribution from Tamils to Sinhalese could be much higher than 50 per cent. According to various anthropological studies done by Indian and international scholars, it is rational to accept that Sinhalese are a cross bread of Vijaya and his group, Veddas and other Indigenous tribes, and Tamil and other South Indian immigrants.  As such, genetically, Sinhalese are much closer to Tamils than Indo-Aryans, while the genetic difference between Sinhala and Tamil could be negligible.

(d) According to the human physical features (body complexion etc.) and cultural and social behaviours, Sinhalese are closer to Dravidians, mainly Tamils, than North Indians. If Tamils and Sinhalese are in the same type of costumes, immediately, both look alike and are represented by the same hues of brown pigmentation varying degrees from very dark brown to light brown.  Even many Sinhala surnames and first names are Similar to Tamil names, i.e., Weerasinghe (Sinhala), Weerasingham(Tamil), Rajasinghe(Sinhala), Rajasingham (Tamil), Gooneratne (Sinhala), Gunaratnam (Tamil) and first names like Ranjani, Padmini, and Seetha. etc., are used commonly by Tamil as well as Sinhala women.

(e) The Sinhala language also may have evolved as a mixture of languages used by those communities and more significant influence from Indo –Aryan languages. Also, it is essential to note that the shape of the Sinhala script is different from the scripts of Indo-Aryan languages but much closer to the Tamil script because both are round shapes. Under this scenario, ‘Sinhala’ is a unique language and a nation that evolved within the Island of Lanka with a mixture of indigenous people and migrants from different parts of India (Indo-Aryans and Dravidians).

Tamil Population in Lanka

As discussed before, intermittent immigrants from South India may have assimilated to the Sinhala nation, which Vijaya established in the 6th BC. However, from the 3rd century BC to the 10th century AD, many Tamil invaders ruled the northern part of Lanka intermittently for short and long periods. Even after defeating those invaders, some of their followers would have remained under Tamil identity without assimilating into the Sinhala nation, as their numbers were significantly large and were economically and politically powerful. Further, in the 10th Century AD, the Cholas Emperor invaded Lanka, absorbed Lanka as a province of the large Cholas Empire, and ruled for 78 years. Many Tamils who came during this period as rulers, administrators, trades, and service providers may not have returned to India after defeating Cholas in 1070. Due to the superiority complex of colonial masters, they may not have assimilated with the Sinhala nation. During this period, Sinhalese could have been side-lined, discriminated against, and outcasted by ruling Cholas elites. Also, due to Cholas’s political and socio-economic domination over a long period, the Sinhalese people who lived in the northern part of the country may have converted to Hinduism and gotten used to the Tamil language.  If that were the case, present low-cast and untouchable Tamils would have been the outcasted Sinhalese who lived in the North before the Cholas invasion. Though some Sinhalese resent the Northern Tamils today, most could be originally Sinhalese.

Many Buddhist and Sinhala Archaeological ruins have been found in the North and East than in the present-day Sinhala Buddhist Settlements. One can hardly find archaeological evidence of Hindu Tamil Culture in the present-day Tamil settlements. No substantial archaeological remains are evidence of the Tamil homeland in the North or East before the 11th century, and those belong to Sinhala Buddhist culture. Those Archaeological sites may have been constructed by Sinhala Buddhists who lived in those areas but seems to be converted to Tamil Hinduism after the Cholas invasion. If those areas were original Tamil Hindu settlements, there was no reason for them to construct Buddhist temples and use Sinhala inscriptions related to Sinhala Buddhist culture. Another possibility is that the Tamils in the North and East could have been Buddhist but converted to Hinduism after the invasion by the Cholas.   In that case, Buddhist Archaeological sites in the North and east could be a heritage of Tamils who converted to Hinduism during the Chola Regime. In that case, those archaeological sites could be a heritage of the Tamils. But that possibility is doubtful as most inscriptions in those areas are in the ancient Sinhala language. The most probable scenario is that most Sinhala people who lived in the North and East would have migrated to safer places after the Cholas innovation. Those who could not afford to relocate and were willing to accept the new colonial masters may have remained and converted to Tamil Hinduism. In that case, archaeological ruins in those areas may be a heritage of Sinhala and Tamil communities. And there should not be competition for heritage and preserving is a responsibility for both.

To be continued

Sri Lanka:  Correct The Price Distortion for A Sustainable Development – Part 3

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This is the third and final part of this series by the author, Click here and here to read previous parts -Editors

Excess Staff in the Public Service 

Compared to developed and developing countries, Sri Lanka has extensive public service, with about 1.5 million employees for a 22million population, which means one public servant for every 14 people and 19% of the country’s workforce. According to the Central Bank Statistical bulletin, 84.6% of the government tax revenue (Rs.1.1 trillion) of the year 20221 has been spent on public servants’ salaries and pensions, leaving little room for other recurrent expenditures and capital investments. This figure doesn’t reflect the salary bill of the semi-government institutions. Currently, there are 675,000 pensioners, and this number keeps increasing every year, and at a point, this will exceed the number of serving public servants. Most public sector workers have no sufficient work but enjoy the total salary and all other fringe benefits. If we estimate 40% is redundant, 40% of the Rs. 1.1 trillion (Rs.0.44 trillion) is a wasteful expenditure annually, which amounts to another massive subsidy for a privileged group who otherwise could have been unemployed.  If the government employs someone at the age of 18 years, serves for 42 years and lives for 81 years, the government will have to maintain him for 63 years. After his death, if the dependant lives for another 21 years, altogether government is committing to 84 years to obtain his services for 42 years. The above simple example is sufficient to understand the gravity of the problem created by the oversized public service.

 In 1990, recruitment to the public sector was frozen, and a voluntary retirement scheme (VRS) was introduced to reduce the size of the public service. Most of the excess cadre was unskilled, who couldn’t be employed anywhere else for that remuneration. Therefore, many did not agree to early retirement, which could have resulted in a low pension for the lifetime and dependents after their deaths. However, the opportunity availed under VRS was capitalised by essential categories such as nurses, engineers, accountants, science and mathematics teachers, and technicians of various fields, creating a vacuum of those skills in the public sector. The government was compelled to fill those vacancies again with qualified but inexperienced people while paying the pension for pre-mature retirees. In 1995, 2005, and 2015, the size of the government service jumped upward due to political reasons.

In 2022, in place of VRS, the government adopted a new approach. According to the circular issued by the Ministry of Finance, public sector employees can avail of no-pay leave to work abroad for a maximum of five years without affecting their seniority and annual increments. This has created great enthusiasm among the employees. However, unwanted cadres (unskilled) may face difficulties securing foreign jobs. Professionals in various fields have a good demand, and heads of departments may find it challenging to prevent them from obtaining five years’ leave. Like in 1990, a vacuum may create again in the essential cadres of public service, compelling the government to do new recruitments. As employees are not retiring under this scheme, vacant positions can’t be filled without creating additional cadres. If that happens, while the new cadre is in the service, employees on leave also shall accommodate after five years, doubling the burden. 

Instead of attempting to reduce the size of the government service in general, a scheme targeted towards unwanted cadres may produce better results. For instance, heads of institutions shall identify such people by name, and provisions of the circular shall apply only to them. Until they find foreign or private sector jobs during the five-year leave period, allow them to stay home with half the salary.  Half of the salary, overtime payments, electricity, telephone bills, and office space will be saved in that case. As a by-product, traffic congestion will be reduced, and the efficiency of the remaining workers will be improved.  Another solution is establishing a combined service for all SOEs, like in the public service. Then employees may be transferred to needy institutions from excess institutions without new recruitments. That would prevent unwarranted competition among institutions for salary and promotion schemes. Also, Politicians will not be able to overload the staff with unwanted cadres. Moreover, excess staff from SOEs may be transferred to public service vacancies instead of new recruitments. Further, in establishing new institutions and expanding the operation of existing institutions, excess staff may be transferred to those places without new recruitments.

Fraudulent Practices

According to various media reports, from time to time, governments write off unpaid taxes and duties from companies. In addition to the above-discussed futile expenditure, many public funds are being drained from public coffers due to the above tax alienation.  However, I don’t have data to highlight the seriousness of the issue.  But the importance of the problem can’t be underestimated. Even with the tax reduction in December 2019, the revenue loss was about Rs500 billion per annum, which continued until the tax revision in 2022. Unpaid accumulated indirect taxes, such as customs duties, excise duties, VAT, etc., are also being written off from time to time. Consumers pay indirect taxes, and companies are only tax collectors. Therefore, companies have no right to keep those; they should pay those to the government or return them to the consumers who paid. But governments have allowed companies to keep these silently, which amounts to fraud. Authorities are allowing tax evasion and accumulating unpaid taxes, compelling the government to costly borrowings to fill temporary gaps. Tax alienation, as well as allowing tax evasion, amounts to a significant subsidy in disguise to a few privileged/corrupt individuals and companies.

Poverty alleviation

The Samurdhi program was launched in 1995 and implemented over the last 28 years as the national poverty alleviation strategy. Conceptually, it has several components for sustainable poverty alleviation. (Income transfer, credit for self-employment, infrastructure rehabilitation, social welfare, awareness building, etc.). As of 2020, 35% of the households (1.8 million) were receiving Samurdi benefits, and another 800,000 were on the waiting list. Including them, it will come to 51% of the households in the country.  While the number of families below the official poverty line has come down to 4%, Sumurdhi relief recipients remained at a very high level of 35% of the total families. It has created a permanent dependency, and no one wants to get out of the program. There are many criticisms about the targeting of the benefits. While non-eligible families are receiving benefits, many eligible families have denied them. Also, there is no regular exit and entry mechanism for the benefits. The government spent 52.47 billion on samadhi relief payments in 2020, which accounts for 0.35 % of the GDP.

Under the Samurdhi banking system, assistance is extended for self-employment/micro-enterprises. But rarely someone comes out of poverty. While a large majority who can work receive the relief grant, the vulnerable without breadwinners in the family are receiving insufficient amounts to meet their basic needs. Self-employment is a mythical solution for most unskilled people. It will help only a few people with entrepreneurial skills and attitudes. Others must be employed for monthly or weekly wages to escape poverty.  

Most Samutdhi recipients can be easily diverted to an Employment Guarantee Program (public work /cash for works program) to maintain public properties, which are hitherto neglected due to a lack of funds. (Irrigation schemes, provincial and local authority roads, landscaping, schools, hospitals, etc., and various local government functions). The issue of targeting or selecting beneficiaries does not arise as only the unemployed, and the absolute poor will participate in such a program. Under such a scheme, the number seeking the Samurdhi relief grant will decrease drastically, and the public assets will be maintained.  Suppose a reasonable percentage of the above-discussed fruitless expenditure is saved through appropriate strategies. In that case, sufficient funds will be available to implement a National Employment Guarantee Scheme (cash for work) and adequate assistants to vulnerable families to alleviate absolute poverty.

 Conclusions

The above is a brief account of significant subsidies and wasteful expenditures, resulting in price distortion in the market and mal allocation of scarce resources. There may be many more such futile public expenditures contributing to the problem.  As people do not pay the actual economic costs for many things, they have gotten used to an artificial style of living, which is unaffordable to the overall economy. If we can correct a significant percentage of these distortions and unproductive spending, adequate resources can be generated to invest in a rapid growth phase and support the poor without many public debts. The government must allow SOEs to sell their products at a cost-reflective price with a reasonable profit margin, enabling them to sustain and invest further. The poor, who cannot afford market prices, should be supported sufficiently to satisfy their basic needs. Overall savings from economic reforms would be adequate for that purpose. However, cash grants will go to the wrong hands, like in the Samurdhi. Therefore, launching an employment guarantee scheme is more advisable and manageable. Then the cash grant should cover only vulnerable families. However, over the decades’ distortion of market prices and subsidies have been used as bait to lure voters, and now it is a structural issue, embracing the whole economy and the gamut of life, creating a cancerous effect. This needs far-reaching reforms, but such an attempt may backfire on the government. It shall be done with a cautious approach, step by step, with a holistic approach.

Concluded

Sri Lanka:  Correct The Price Distortion for A Sustainable Development – Part 2

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This is the second part of this series by the author, Click here to read the first part -Editors

Water Supply

Providing safe drinking water and improved sanitation services have been the government’s priority for many decades. In 1975 National Water Supply and Drainage Board (NWSDB) was established, and the responsibility was transferred to it. Before that, it was a local government function, and cost recovery was not considered an important issue. The local authorities provided Dug wells in rural areas, and the pipe-boned water supply was limited to urban areas. Their priority was to roadside public stand posts for free water, and the domestic connections were charged a nominal amount. Hence water was considered a free public good without a price.  Irrigation for agriculture is still a free public good with no price.

With the introduction of the Community Water Supply Projects, pipe-borne water supply was expanded to many rural areas, and today 58% of households have access to pipe-borne water. Gradually NWSDB expanded its operation to rural areas with high population density. The capital costs of projects are now shared 50:50 between the treasury and NWSDB. Still, domestic water is considered a government responsibility and only a part of the cost is recovered from the poor. Yet 25.8% of the total production falls under the non-revenue water category, which is put into the water supply system but not billed. This is mainly due to poor maintenance, leakages, and management issues such as water thefts, calculation errors, etc.

The average unit cost of producing potable water has increased from Rs.48.87 in 2020 to Rs. 60.63 in 2021 (Economynext 05.06.2022). According to the Water Tariff Revised in 2022, water is billed under 12 different categories for different purposes at different rates. Samurdhi beneficiaries are charged a nominal tariff of Rs.5.00 per unit for the first five units (5000Lt.), Rs. 10.00 per unit for the second 5 units, and Rs. 15.00 per unit for the following five units. Accordingly, 15,000 Lt. per month is highly subsidised for them, and the subsidy element (tariff below the cost of production) exists for up to 25 units (from 16to20 units Rs. 40 and 21 to 25 units Rs.58 per unit). In contrast, Domestic(other) Category consumers will have to pay four times higher than the Samurdhi recipients for the first five units (Rs. 20.00 per unit), and the subsidy element exists only for up to 15 units. Beyond that, an exceptionally high punitive tariff, which increases with the usage from Rs.86.00 up to Rs. 238 .00 per unit, is being changed.

There are four other categories where the tariff is much below the cost of production, namely, (a) Non-Samurdhi Tenement Gardens, (b)Public Stand Posts, (c)Schools, religious and charitable institutions, and (d) Local Authorities.  It means that out of 12 categories, 5 have a substantial subsidy. The tariff for the other seven categories (production-oriented) is much higher than the cost of production. In addition to the usage charge, a monthly service charge, increasing parallel to the consumption, is also levied from those categories. Therefore, the tariffs applicable to production-oriented and non-samurdhi household categories are punitive and discouraging. For instance, tariffs for the port and shipping, SOEs, BOI companies, and industries are Rs670, Rs.116, Rs.85, and Rs 82 per unit, respectively.

However, the NWSDB has demonstrated that it can recover a considerable portion of the subsidy cost through punitive tariffs from production-oriented and high-user domestic categories. According to the 2019 Annual Report, the losses for 2018 and 2019 were Rs. 1,176 and Rs. 580 million, respectively. According to the Economynext-05.06.2022, the NWSDB had posted a profit of 507 million rupees in 2020 but again lost 3,087 million in 2021, with salaries rising 19 per cent. If not for the salary increase, the NWSDB could have remained at least at the break-even point in 2021. With the tariff revision in 2022, it may reach the break-even point. Unlike other SOEs, NWSDB delivers essential public goods without a massive loss. This is mainly due to the capital costs subsidy granted by the treasury and the tariff structure to charge more from whom it is affordable to pay. But NWSDB is also overstaffed, and remunerations are relatively high.

Due to the scattered nature of housing and settlements, the capital cost of water distribution in rural settlements is very high. Many rural water supply schemes are found in hilly terrain in the wet zone, where water sources are abundantly available in good equality. Still, due to the hilly terrain, the capital cost of the distribution network is high. But in contrast, drinking water is a critical issue in the dry zone, covering about 70% of the country’s land area. This is the area chronic kidney disease is prevalent and suspected that the cause is poor-quality drinking water. Unlike in the wet zone, water sources are not found easily, and the quality is also unacceptable. Dry zone communities face many inconveniences and opportunity costs, such as risky long-distance travel and consuming many hours of the day to collect a pot of drinking water. If they purchase potable water from the market, they will have to pay more than Rs.50.00 a litter. Under this scenario, selling one unit (1000 litres) of water for Rs. 5.00 or Rs 20.00 in the wet zone and urban areas can’t be justified on humanitarian grounds. Therefore, financing potable water for the dry zone is justifiable, even at a higher cost, considering social justice and equal access to safe water. Further, the NWSDB must take serious action to reduce the 25.8% non-revenue water supply to a technically acceptable minimum level to increase its revenue. Currently, six tariff categories are below the cost of production, which seems highly irrational.

Instead of ad-hoc political decisions to revise the tariff for electricity and water from time to time, it is more logical to commission an in-depth study to restructure the tariffs to make water and electricity prices affordable to domestic users, discourage excessive unproductive use of subsidised products and remove punitive tariffs from the production-oriented categories.

Aviation

The national carrier rebranded as Sri Lankan in 1998 following its partial acquisition by Emirates. In 2008, the government re-acquired all the shares and management rights from Emirates. Then the accumulated profit of Sri Lankan was Rs. 9.288 billion (Wikipedia). In any case, Sri Lankan was not a burden to the treasury; instead, a share of the profit was paid to the treasury from time to time. It was revealed at the COPE meeting in July 2022 that the loss of the Sri Lankan as of 31 March 2021 from the day it was taken over from the Emirates was 372 billion, and the daily loss is about Rs 84 million.  Mihinlanka, which commenced its business in 2007, also amalgamated later with Sri Lankan with an accumulated loss of Rs 13 billion.  In 2020 Sri Lankan’s debt obligation exceeded Rs 372 billion. Also, its net worth was negative Rs.262 billion. Most of the above debts are to the Bank of Ceylon, the People’s Bank, and the CPC. Further, it had sovereign guaranteed internationally issued bonds worth UDS$ 175 million. If the government declares insolvent or shuts down the airline, the two banks and the CPC must write off all debts. This will severely affect the two banks’ liquidity, sustainability, and profit. The CPC is also heavily indebted to the above two banks. So eventually, that burden also will pass to two banks. The government owns two banks, and finally, all these responsibilities fall on the shoulders of the taxpayers. Moreover, the government could face multiple jurisdictions worldwide regarding the non-settlement of foreign liabilities.

Subsidising essential services is understandable. But subsidising foreign travel by affluent Sri Lankan citizens and foreigners has no meaning for the taxpayers. More than 99% of taxpayers do not benefit from this colossal subsidy. Many airlines provide services from and to Colombo to many destinations, even at a lower price than Sri Lankan. So, Sri Lankan does not fill any service gap too. If there is any justification for continuing the operation of Sri Lankan with subsidies, it would be to support tourism and strengthen linkages with foreign economies. In any case, earning from tourism cannot compensate for such a colossal loss/subsidy. It may be possible to justify the operation of a national carrier for national pride. If so, the airline must be restructured and scale down its operation to match that intention without a loss, at least on a cost-recovery basis.

 However, the establishment of Mihinlanka Airlines, re-acquiring Sri Lankan from the Emirates, and pumping public funds to Sri Lankan to expand its operation without a well-thought business plan are economic crimes for which the decision makers are responsible.

 Lose-Making SOEs

Subsidising the losses of state-owned enterprises (SOEs) and selling their products below the cost of production also amounts to direct subsidies to their employees and indirect subsidies to consumers while distorting the market prices. Sri Lanka has 527 SOEs. Of which 52 have been classified as “Strategically Important “enterprises by the general treasury. But some strategic enterprises, which are involved in purely commercial activities, such as CEB, CPC, CWE, CTB, Sri Lankan, Hotel Development Lanka Ltd, etc., have been running as loss-making enterprises for many years.

 Out of the non-strategic enterprises, 287 SOEs are also commercial ventures that can be run more efficiently by the private sector. According to the information available from the Department of Public Enterprise, out of 527 entities, only 57 are self-funding. In 2019, the total losses sustained by 52 SOEs amounted to Rs 151 billion. According to the above information, budgetary support amounting to Rs. 49 billion has been provided to loss-making institutions, of which Rs. 20 billion was for recurrent expenditure. Most SOEs’ pricing is not cost-reflective and sells their goods and services below the cost of production(subsidising). Perhaps, if the price becomes cost reflective, their products may be unaffordable to the people because the cost of production is very high due to inefficient management, wastage, and corruption.

 The private sector may produce those at a lesser cost resulting in lower selling prices and tax revenue for the government. According to the Advocata research team, the total accumulated loss of strategic SOEs from2006 from to 2020 amounted to Rs 1.2 trillion. As per the Public Finance Data, the top five losers, namely, CPC (Rs.628 bl.), Sri Lankan (Rs.248 bl.), CEB(Rs.47 bl.), Airport and Aviation Services (Rs.6 bl.), and SLTB (Rs.1 bl.) have recorded a total loss of 930 billion for the first four months of 2022. The government revenue for the same period is only Rs 543.6 billion. SLTB has a loss of Rs.1 billion in providing transport facilities for many middle- and low-income commuters. But Sri Lankan has a loss of 248bl., which provides aviation facilities to a minimal number of well-to-do Sri Lankans and foreigners.

When SOEs in short of funds or on the verge of bankruptcy, they do not follow the due process to borrow, liquidate or re-structure the business. They borrow inputs from other SOEs or borrow money from state-owned commercial banks. But it is done not on the strength of their balance sheets but at the request of the treasury, sometimes on verbal instructions, even without a treasury guarantee.  They continued to do so for many years. For instance, Sri Lankan, GCR, and CEB borrow their inputs from the CPC and keep accumulating debts.  The CPC borrows from the Peoples Bank and Bank of Ceylon to fill that gap. If CPC can’t borrow further due to cumulative outstanding debts, the treasury issues a long-term financial instrument to the CPC and passes the liability to the next generation. The CPC trade it and settle previous loans, and continues borrowing. This is a big cross-subsidy between SOEs. This amounts to a pyramid operation by the government. This can’t continue forever, and all resources will get exhausted and may collapse all institutions at once. It is advisable to allow major institutions to operate independently. Then who can sustain will sustain on its own strength. Others may get a boost to adopt sound management practices or restructure/privatise/liquidate.

But trade unions and politicians argue that those enterprises should come under state ownership to ensure the national interest and to prevent exploitation. As discussed above, the exploitation of consumers and taxpayers is very high under state ownership. However, policymakers may have a genuine interest also to keep essential services like energy, transport, health, education, etc., under government control to ensure the national interest/national security, respond to disasters, and assist the poor. But there are many low-cost and efficient solutions to achieve such objectives.  For instance, petroleum infrastructure and regulatory power may be kept with the CPC while allowing the private sector to import and sell fuel competitively. Railway Department can own the railway infrastructure and regulatory authority, while the private sector is running trains. Such arrangements ensure the government’s control over the service while the advantage of quality and price competitiveness passes to the consumers.

The impact of subsidising the loss of SOEs is not trickledown down to the large segment of the population, the consumers, and the taxpayers. But some groups with a vested interest have developed private sector phobia and hold the taxpayers and consumers to ransom for their economic, political, and power gain. Employees want to keep those under state ownership to secure higher income and fringe benefits with little or no work. Trade union leaders want to maintain SOEs at any cost to demonstrate/excise the power and authority and strengthen linkages with the upper echelons of political parties. Politicians wish to use the employees and other resources free for election campaigns and give jobs to their supporters. Further, they can support campaign funders by appointing them to management boards and promoting business linkages such as contracting, outsourcing, granting business permits, etc. Also, sometimes they can financially benefit by being involved in corrupt practices in procurement, service delivery, and recruitment.

But the public is happy if the quality of goods and services is satisfactory and reliable at a reasonable price, regardless of the ownership of the business. For instance, if a reasonably priced, reliable power supply is available, the customers don’t want to verify whether it is by the CEB or a private supplier. The customers don’t consider whether the fuel is from the CPC or Indian Oil Company if it is reliable, convenient and reasonably priced. But without knowing the facts, the taxpayers and the consumers also fight against the privatisation of loss-making entities.    

In the case of infrastructure or capital expenditure, passing the liability to the next generation is justifiable because they also become beneficiaries of those investments. But recurrent /consumption expenditure incurred by SOEs like SLTB, Sri Lankan, and Railways is only for the benefit and convenience of the present generation. Accumulating losses, defaulting and long-term borrowings for such expenses means passing the liability of luxurious consumption of the present generation (politicians, employees, trade unions) to the next generation, for which decision-makers have no rights. It is an unforgivable, very dangerous economic crime. If the private sector runs those commercial activities, the government can collect more revenue as taxes instead of subsidising the losses. Also, the government will have more time and resources to do its primary function, governing the country, which has been neglected hitherto by all governments.

To Be Continued

Sri Lanka:  Correct The Price Distortion for A Sustainable Development – Part 1

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12 mins read

A riot in Sri Lanka dethroned the democratically elected prime minister and the president in May and June 2022, respectively. Ranil Wickremesinghe, who did not contest the presidential election and could not get the support of at least one per cent of the constituents during the general election, was elected as the president by the parliament. However, he did not have a single MP in the parliament from his party to vote for him. He doesn’t have members of parliament from his party to appoint to the cabinet of ministers. As such, his political opponents who are entirely against his liberal policies have been appointed to the cabinet, and he is yet to find MPs to fill all portfolios. Under these circumstances, since the beginning of 2022, Sri Lanka has been in Socio-political and economic turbulence. The country is bankrupt, people are suffering, and the economy is in reverse gear. 

Historically, Sri Lanka is accustomed to a welfare-oriented economic culture. During the colonial period, universal free health and vernacular education were available. In addition, universal and generous food subsidies with rationing started during World War II. Probably this would have been done to keep Sri Lankans contented, considering the strategic importance of Sri Lanka for the war. However, since independence, providing welfare and subsidies for the whole gamut of life of Sri Lankan has become a perpetual feature of the annual budgets. At the inception, the cost of subsidies and welfare was met from the surpluses generated from the plantation sector and the export of natural resources as raw materials to advanced countries. Even after depleting those resources, welfare programs and subsidies continued at the development budget’s cost but within the domestic economy’s capacity.

After introducing the open economic policy, the inflow of foreign grants and concessionary credits increased considerably. The government entered a comfortable zone enabling it to continue with the welfare budget and various subsidies without any attempt to increase the government revenue and foreign exchange earnings. Even after exhausting the concessionary foreign credit and grants, the government remained in the comfortable zone with high-cost local and foreign borrowings without enhancing the revenue. In addition to that, money printing was also done. The ability to brow and provide welfare and subsidies became a success indicator for all successive governments. The citizens are also accustomed to thinking on the same line. The political leaders, administrators, and economists, who managed the economy, did not seriously consider how to do debt servicing without being insolvent on a future date but continued with ceaseless borrowings. By living with a plethora of subsidies, individuals became accustomed to enjoying artificial prosperity and living beyond their means. Maintaining the rupee at an artificially high value in the recent past did not allow people to feel the actual cost of imported goods. Hence consumer preference was also for imported goods creating a high demand for foreign exchange, which was in short supply for debt servicing and essential imports. Over-dependency on foreign grants, domestic and external borrowings at a high cost, and lack of attempt to improve the government revenue and export earnings are the leading causes of the economic crisis/ bankruptcy in 2022.

 For this article, the word “Subsidies” covers a wide range of wasteful public expenditures that don’t contribute to the national economy, distort the market prices/demand, and lead to mal allocation of resources. It covers (a) cash and material grants without rendering goods or services, (b) price subsidies for various goods and services, (c) subsidising the losses of state-owned enterprises, (d) overstaffing in the public sector institutions, (e) losses due to corruptions, mismanagements, and wrong decisions (f) and all kinds of unproductive public expenditure and wastages.

There are different types of subsidies and welfare programs, such as direct cash and material grants, price subsidies for consumer goods and inputs, cross-subsidies between sectors and subsectors of the economy, cross-subsidies between institutions and different products of the same institution, tax holidays, different tax rates for industry types, subsidising the losses of SOEs, overstaffing in government institutions, etc. All these expenditures become an income for some people without contributing to the economy. Subsidies for inputs and consumer prices prevent reflecting the actual economic cost of local products and distort the consumer’s price in the market. Consequently, the demand also doesn’t reflect the people’s real needs and purchasing power. The ultimate result is the mal allocation of resources, low productivity, high cost of production, low income, and inefficiency of the economy at the macro level. The impact of a few subsidies and resultant market-price distortion are discussed below.

Agriculture products

Rice, the staple food of Sri Lanka, was sold at a highly subsidised price on a ration for everybody, regardless of family income, from 1945 to 1978, with some modifications to the scheme from time to time. Consequently, two different prices, subsidised and open market prices, existed for many years. From the 1960s to the 1980s, the government purchased paddy at a relatively higher guaranteed price, encouraging farmers and sold it at a subsidised price to relieve poverty. Further, irrigation water, the most important and valuable input of paddy farming, is still free to the farmer, though it is a hefty cost to the nation. In addition, low-cost finances were also provided through the cooperative banking system. The fertiliser was also supplied at a nominal price, virtually free from 2006 to 2020. Research findings and extension services are also provided free for everybody. Due to the guaranteed price and availability of low-cost/free inputs, farmers do not pay the actual cost of inputs.  Though the government has spent a lot of public resources to increase paddy output, farmers remained poor. But the market price of rice is unaffordable for many people and high compared to imported rice. If all subsidies are removed, the actual cost of production of a kilo of rice could be doubled. In addition to subsidies, tariff protection and the guaranteed price are also available for rice production. The farmers could not reap the optimal Productivity and income of these support packages due to inappropriate technology and farming practices.

Tariff protection and guaranteed prices are available from time to time for certain other field crops, such as lentils, big onions, potatoes, dried chillies, maise, turmeric, milk, sugar, and poultry products, but it is inconsistent. Farmer’s reaction to intermittent ad-hoc tariff protection distorts the market (demand and supply) and gets them into a further disaster. High prices in a season encourage farmers to produce more in the next season, dropping prices below the cost of production.  Hence, often, it brings more fortune to traders/stockists than farmers. If everything works well, farmers may occasionally benefit from crops like potatoes and onions, but at a very high hidden cost to the macroeconomy, consumers, and the environment. Under these circumstances, much research is needed to produce those crops competitively. Otherwise, those land and resources may be used for other high-value crops and economic activities, which have the capacity to generate more income, employment, and foreign exchange. Having different climatic zones and two rainy seasons and two dry seasons, anything can be cultivated in Sri Lanka. But tariff protections, subsidies, and incentives should not encourage the misuse of valuable resources. Perhaps, instead of using those resources for import substitutions, cultivating export-oriented crops may bring more benefits to the economy. However, rice is not a product that can respond immediately to the demand and price. Also, there is no surplus rice production in the world market.  As rice is the staple food, reaching near self-sufficiency, even at a comparatively higher cost, is justified to ensure food security. However, producing a surplus is detrimental to paddy cultivation’s sustainability as the production cost is higher than in other rice-producing countries. Also, subsidising the cultivation of paddy fields in the low country wet zone is justifiable to ensure those will remain as lowlands for water retention.

As discussed above, Sri Lanka has spent a colossal amount to subsidise paddy farming and to increase the area under cultivation for over seven decades.  For the government, researchers, and the public, agriculture means paddy farming, but not very wide other varieties of grains, lentils, vegetables, fruits, and animal products. Prices of those nutritious foods are relatively high and unaffordable to ordinary people.  As a result, though we are a middle-income country, our malnutrition level is much higher than other developing countries in the region. Even with a plethora of subsidies, agriculture has become a survival strategy for the rural poor and reinforced the subsistent farming system. Sri Lanka needs more research on technological innovations in seed production, livestock breeding, farming practices, tools and equipment, post-harvest technology, etc., appropriate for smallholder farming to improve productivity and make it profitable.

Transport and petroleum

During the last three decades, government policy on energy was inconsistent and kept changing with party politics.  Unlike other countries, Sri Lanka kept fuel prices low, even at times of high prices in the world market. From 2007 to 2014, while fuel price in the world market was very high, Sri Lanka kept the kerosene and diesel prices relatively low by keeping the petrol price high. Very often, fuel prices in Sri Lanka are kept low compared to other countries in the region. In 2016, the Gasoline price in Sri Lanka was US$0.88 per litter. During the same period, gasoline prices in India, China, and the United Kingdom were US$ 0.97, US$ 0.96, and US$ 1.46. respectively. Though CPC is highly indebted to banks, the fuel is being supplied to CEB, Railway Department, the Armed forces, and Sri Lankan Air Line on credit and subsidised price. The CPC meets the financing cost of these credit supplies. On many occasions, the government used to tax the CPC exceeding its cost of production, compelling it to borrow to fill the gap. The CEB, Sri Lankan, and Railway are not concerned very much about their cost of production as a significant part of it is met by the CPC. Consumers also opt to use more diesel and kerosene to increase profitability, disregarding the actual economic cost to the nation.

However, in 2022, petroleum price distortion has been corrected to a considerable extent. In June 2022, the diesel price in Sri Lanka stood at US$ 1.28, while India, China, and Pakistan stood at US$ 1.18, 1.03, and 1.35, respectively. Kerosine price also increased to reflect the actual cost. Gasoline price has also increased to US$ 1.53, which is relatively higher than the above-said countries. Further, the cross-subsidization has been removed, reflecting the actual cost of production of each product. This price correction should continue without distorting it again for cheap political gains. However, losses sustained due to mismanagement, inefficiency and corruption shall be eliminated to reduce the cost of production.

Due to the subsidised/ distorted fuel price and the low priority for public transport, ownership of private vehicles has increased rapidly. The annual per capita petroleum consumption in Sri Lanka in 2021 stood at 350.5 Lt, while India, Bangladesh, Pakistan, and Nepal stood at 194.5, 41.6, 158.6, and 91.6Lt. respectively. The number of road motor vehicles per 1,000 inhabitants of Sri Lanka, excluding two-wheelers, was 157 in 2019. The same for Pakistan, Nepal, India, and Bangladesh was 111 in 2019, 110 in 1918, 45 in 2016, and 27 in2021, respectively.

The policies and strategies in the transport sector, including subsidised fuel, encouraged the use of private vehicles. Today Sri Lankans are reluctant to walk even a 200-meter distance; instead opt for a car, three-wheeler, or motorbike. Since 2022, Sri Lanka has had no foreign exchange to import fuel to satisfy the demand, but still harping on to maintain the previous lifestyle.

Electricity

The government policy was to achieve a hundred per cent coverage of households with electricity connections. According to the World Bank Collection of Development Indicators, 100% of the country’s population had access to electricity in 2020. This achievement is due to the political commitment of all governments to ensure 100% electricity coverage of households. For several decades, subnational-level development programs such as the Decentralised Budget have emphasised rural electrification. It was used by all political parties as bait to lure votes in all elections. Rural electrification has several negative economic aspects, such as high capital outlay due to scattered housing, low demand, low purchasing power, lack of commercial demand, high transmission loss, etc. Though rural electrification has no significant contribution to economic growth, it has improved the living standard of rural communities by uplifting the status of health, education, welfare, and use of household electrical equipment. So, the quality of human capital has improved tremendously, which would lay the foundation for future economic advancement if appropriately used.

The government and CPC highly subsidise the CEB to generate and distribute electricity. Further, the capital cost of rural electricity is 100% funded by the government. But CEB is running at a massive loss. It is reported that from 2006 to 2017, the cumulative net loss of energy sector institutions was 363.9 billion. According to the CEB Annual Report 2019, 37% of the electricity sale was for highly subsidised domestic and religious uses, but revenue was only 31.6%. The Average selling price was Rs. 16.63 per kWh, while the average cost of production was Rs 23.29. Cross-subsidising between consumer categories couldn’t fill this considerable revenue gap without passing the burden to the taxpayers. According to the same report, the total number of employees was 26,114; perhaps about 50% could be overstaffed. Overstaff also amounts to a considerable subsidy or payment of unemployment benefits by a commercial entity, which the Treasury should have done through a welfare program.

According to a consultative document of PUCSL, the average cost of production of one unit of electricity is forecasted as Rs.32.87 for 2022. The cost increase of Rs.9.58 in 3 years from 2018 to 2022 is unrealistic. The average selling price for 2022 has yet to be made available. According to the “Electricity Tariff Revision -2022”, the subsidy element to domestic use and religious places has been removed to a considerable extent. However, compared to the forecasted average unit cost of production (Rs.32.87), the tariff is extremely low for the domestic user category, 0 to 60kWh per month (Rs. 8.00 for the first 30 units and Rs.10.00 per unit for the following 30 units). The religious places are subsidised up to 120 units a month (Rs.8.00 for the First 30 units, Rs. 15 for the second 60 units, and Rs.20.00 for the following 30 units). Exceeding the consumption of 180 units a month, Rs.65.00 per unit is charged, much higher than the forecasted average unit cost of production.

The tariff for industries (Rs. 20.00 per unit), general-purpose users (Rs. 25.00 per unit below 180 kWh and Rs 32.00 for 181 and above), agriculture, and street lighting (Rs.20.00), are also below the cost of production. However, all these categories have a monthly service charge which is increasing parallel to the increasing usage. Also, there is an optional time of use; the low tariff for the daytime and off-peak hours and a slightly higher tariff than the cost of production for peak hours (agriculture and industries Rs.35 and general-purpose Rs.34). However, the peak time tariff and monthly service charges are grossly insufficient to meet the cost of the subsidy.

 The second category of domestic users (consumption above 06kWh), up to 90 units per month, is entitled to a subsidised tariff of Rs 16 .00 per unit. Compared to the tariff of the low quantity user category, this group pays a two times higher tariff for the first 60 units. There is no subsidy element beyond 90 units a month (Rs50.00 for 91-180 units and Rs.75.50 above 180 units). Most households consume more than 90 units monthly, resulting in an automatically annulled subsidy. Therefore, this is punitive and much higher than the forecasted average cost of production of Rs. 32.87.  According to the revised tariff, the entire cost of the subsidies to the low-quantity domestic user category, production-oriented sectors, street lighting, etc., has been passed on to the high-quantity user domestic customer category and religious institutions, which is highly unfair. Further, the tariff applicable to electric vehicle charging is Rs.81.00 per unit in the daytime. This discourages the use of electric vehicles and contradicts the overall policy of reducing the use of fossil fuels.

Increasing the total revenue is very doubtful if the high-quantity domestic user category becomes unaffordable for the revised tariff. If the above-said forecasted cost of production is correct, the loss may be increased further. The Optional Time Use (daytime, peak, and off-peak) is reasonable to discourage the overuse of power during peak hours. However, the monthly service charge is not a strategic tool but an attempt to collect additional money from those who can afford to pay.  The tariff structure has become complicated and irrational because of several tariff blocks, user categories and loading with various charges. Instead of having many user categories, such as low-income, middle-income, rich, small industries, large-scale industries, tourism, agriculture, government institutions, streetlights, etc., tariff Blocks may be rationalised with a small number of user categories. It must structure to discourage excessive non-productive consumption, allow reasonable domestic use without punitive tariffs, encourage consumption for production-oriented activities and make the poor affordable for the minimum requirements. In doing so, the underlying principle shall be ‘operating the business above the breakeven point’. Under any circumstances, subsidising the inefficiency, corruption, and negative impacts of individual or group hypocrisy and wilful sabotage is not acceptable.

Energy prices and consumption are not guided by economic forces but by the interest of politicians and pressure groups. Social and political concerns have overshadowed economic considerations. If all subsidies are removed, the optimal combination of the energy source is used, corruption is minimised, and the electricity is sold at a cost-reflective price, the CEB can become profitable. Then it will save the vast amount spent to subsidise the loss. Ultimately, the energy sector price distortions have encouraged the outflow of foreign exchange earnings for importing motor vehicles and fuel and for constructing costly highways. Also, the distorted price in the energy and transport sectors distorts the prices of many other products. It is worthwhile to do an in-depth study to understand whether the huge loss incurred by the CEB justifies the social benefits achieved through subsidised electricity and to identify a cheaper solution to achieve the same results.

To be continued

Industrialisation: Did Sri Lanka Miss the Bus for Ever?

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16 mins read
1

Even before the independence, most Sri Lankan political leaders believed that industrialisation was the solution to stand up as an advanced nation and create gainful employment for its citizens. To this end, the Industrial Corporation Act was passed by the State Council in 1944. Mr J R Jayawardena had moved a motion in the State Council requesting to prepare a Comprehensive Development Plan to industrialise the Country. These initiatives show that Sri Lankan Political leaders had conceived the idea of industrialisation and realised its importance for economic modernisation much before other developing countries. Most Asian countries, including the Indian Sub-Continent, imported a significant share of industrial goods from the West.  As industrialisation was initiated much before other developing countries, Sri Lanka could have replaced the imported goods in this region with “Made in Ceylon.” At that time, Sri Lanka had potential and comparative advantages, such as a solid foreign exchange reserve to import machinery and technology, locational advantages, including the best international seaport, relatively good physical infrastructure, educated labour force, and professionals etc., to industrialise

The Journey Towards Industrialization

The initiative for industrialisation paralleled the independent movement. British planters probably were not interested in diversifying their investment in Sri Lanka due to the uncertainty created by the independent movement. Most Sri Lankan capitalists had invested heavily in the plantation sector, a lucrative and well-secured investment. Also, the local capitalist class did not have much experience or exposure to industrial ventures. However, most members of the state council and the first parliament were from the capitalist class, favouring private sector ownership of properties and business ventures. The left-wing politicians, who were very active in Sri Lankan Politics, had exposure to the industrial economic environment in Europe. But they supported the idea of state ownership or the communal ownership of industries. Under these circumstances, private capital was not readily available for the industrial sector.  Hence, the first-generation industries, such as the Kankasanturai cement factory (1950) and the Valachchanai paper mill (1955), were started under government ownership during the UNP government, though they advocated for private ownership. Whatever the reason, since the inception of industrialisation, the establishment of large-scale enterprises has become the government’s responsibility.

Though industrialisation was on the national economic and political agenda, D. S. Senanayake, the first prime minister’s vision was to revitalise the glory of the golden era of the ancient Sinhala civilisation in the dry zone, based on agriculture, especially paddy cultivation. Therefore, the industrial sector and industry-related infrastructure did not receive much attention. And a significant share of resources was diverted to the Dry zone-colonization program and consumption subsidies. Dudley Senanayake, and Kothalawala, the successors of DS Senanayake, also did not change the above policy and continued along the same line till 1956.

Paradigm shift

In 1956 S W R D Bandaranaike became the prime minister who advocated for a middle path and a mixed economy. He believed in a planned development with the state ownership of major enterprises. Accordingly, a Ten-year Perspective Plan was formulated with the assistance of local experts and world-renowned economists, such as Garner Myrdal and Joan Robinson. Mr Bandaranaike’s Government’s upper echelon was a mixture of different political ideologists; the majority consisted of a breakaway group from the United National Party, who believed in capitalism, Members of Mahajana Eksath Peramuna, who believed in communism, and various other patriotic groups. As such, his party had no consensus on many policy matters. Though Bandaranaike advocated for a socialist economic policy, the left-wing parties in the opposition considered him a traitor for trying to weaken the left-wing political movement. They did not cooperate with the government programs. Trade unions backed by left-wing parties were a pain in the neck for him. Due to his patriotic and racialist policies, minorities were also kept away from him. Against this backdrop, he confronted many issues between the groups of the ruling party and the opposition parties.

 Also, after 1957, the plantation sector could not generate adequate foreign exchange, and the trade deficit increased and started depleting the foreign reserves limiting the import capacity, which hindered the implementation of the ten-year plan.  Ethnic tension was also amplified simultaneously. Under these circumstances,10 Year Development plan was not implemented as envisaged. With the assassination of Bandaranaike in 1959, the development plan found its natural death. However, in line with the state ownership concept, the Colombo seaport, airport, and Passenger transport were nationalised.

If not for the problems created by trade unions, left-wing parties, and ethnic conflicts, implementing the 10-year plan and the industrialisation process could have taken off the ground as the local and world economic environment was conducive for that. This seems a significant loss of opportunity in our industrialisation and economic advancement journey. However, it has not been discussed much by politicians and economists.

In July 1960 general election, Mrs Bandaranaike led the Sri Lanka Freedom Party. She secured the required majority in the parliament to form a government without the support of the left-wing and other minor parties. But she also faced numerous issues with the trade union actions supported by left-wing political parties, hampering the performance of state-owned enterprises. As a compromise, in the latter part of her tenure, she formed a coalition government with left-wing parties, but it could not survive for long as the right wing of her party broke away from the government. However, during tenure, some of the activities included in the 10-year plan were carried forward, and Mr Bandaranaike’s’ pro-socialist vision and the policy of nationalising important ventures were continued. The nationalisation of the petroleum industry is one of the challenging activities during this period. Several new industries were also established with the assistance of the USSR and Socialist countries. Sugar, Steel, and tire are a few of them. Nationalised ventures, as well as newly established industries, were brought under state ownership. People’s Bank and Insurance Corporation were also found to fill the significant gap in financing facilities in the local economy. While large-scale industries and financial services were state-owned, assistance was extended to privately owned small and medium enterprises in this industrialisation phase. In 1964, a national-level industrial exhibition was held in Colombo to celebrate and demonstrate the achievements of industrialisation targeting the 1965 general election.

Ups and Downs

 However, the 1965 General Election did not give the required majority to Mrs Bandaranaike to form the government. Mr Dudley Senanayake formed the UNP government with the support of seven minor parties. During the period, ventures such as Ceylon Electricity Board and Sapugaskande Oil Refinery were commenced as state-owned enterprises. By this time, state ownership of large-scale commercial ventures had become an accepted norm and no debate on private vs public ownership. Even the UNP, the party that advocates for the capitalist mode of production, complied with this norm. However, Dudley Senanayake’s government’s highest priority was agriculture, especially paddy farming. In addition to the smallholder farming system, he attempted to bring wealthy individuals and the corporate sector into agriculture by alienating large blocks of land and supporting to import of agricultural machinery. This program was greatly influenced by the international movement of the green revolution. However, his government did not make significant structural changes in the economy and continued the industrialisation process with a low profile. 

With the collision of left-wing parties, Mrs Bandaranaike came into power again in 1970 and introduced a significant and far-reaching shift in the overall economic policy. Her government prepared a 5-year development plan focusing on the agriculture and industry sectors. However, before implementing the 5-year plan, the world price hike of petroleum and staple foods created a foreign exchange crisis. It compelled the introduction of import restrictions, much more than the usual tariff protection. Except for most essentials, all other imports were banned or restricted. It aimed to produce almost everything locally to substitute imports and save foreign exchange. This created a void in the market for essential food items and consumer durables such as electronic items, clothes, building materials, agriculture and industrial tools, toys, communication items, and many more. Although the government had followed the industrialisation policy for over a decade by that time, the country did not have the capital, technology, preparedness, and capacity to shift into a rapid industrialisation phase to keep abreast with the vacuum created by import restrictions. Also, it did not have sufficient foreign exchange to import modern machinery and plants to produce quality goods to fill the void.

 In addition to the global economic crisis, ever-increasing youth unrest also reached its climax in 1971 and revolted against the new government without giving a breathing space. In response, the government hurriedly launched several reforms and high-priority programs. One was the “Divisional Development Council” program to employ youths. Capitalising on the scarcity created by import restriction and tariff protection, this program implemented many small and medium-scale enterprises as cooperative ventures to produce consumer goods based on local raw materials endowments. This program did not benefit from modern technology and produced high-cost inferior goods.

This time, the government’s policy did not encourage private sector investments in large and medium-scale industries or foreign private investment. It may be due to the influence of the left-wing parties of the coalition. Running Hotels and restaurants, importing building materials, textile vehicles, tractors, fibre, yarns, and many more commercial activities came under the government monopoly or ownership.  Most of the Sri Lankan capitalist class were land-owned planters. Under the Land Reform Act, the government took over lands exceeding 50 acres. Very little compensation was paid much later, making them a capital-less class. Also, they feared the nationalisation of businesses. Despite the high demand, the local capitalist class have neither the capital nor the interest to invest in industries. As options were limited for luxurious life and lavish expenditure during that period, landowners could have invested in import substitution if; compensation was paid at market value immediately, a private sector-friendly policy was adopted, and the boundaries of nationalisation were explicit. Under this political and economic environment, the country lost the best opportunity for private sector participation in industrialisation.

Under these circumstances, mushrooming enterprises emerged in every nook and corner of the country as self-employment and small and micro enterprises, but many were unviable. These industries became highly inefficient, leading to low quality, high costs, scarcity and finally, misallocation of resources. These massive sacrifices of the producers and consumers could have been a long-lasting success if profit-motivated private sector participation was enlisted, and doors were opened for the technology transfer. Further, the support, including tariff protection, should have been limited to a specific period to selected industries with comparative advantages enabling them to pass through infancy without external competition. However above industrial policy created a greave dissatisfaction among the people, and the government lost the 1978 general election, rejecting the approach by most of the people.   

Out of Gear- The Trade Liberalization  

As discussed, the journey towards industrialisation in Sri Lanka commenced before independence, becoming a high priority from the 1960s to 1977. It got in top gear during 1970/77 but with poor strategies. Without using the lessons learned from that strenuous journey, the trade was liberalised entirely in 1978, making the three-decades journey into a U-turn.  All investments and sacrifices made by the government and people to become an industrial nation became futile. Some of those industries did not have the scale of economies as they were targeting only the local market. Some industries could not meet the local demand as their scale of operation was too small. The technology was archaic, and the raw materials were of low quality. Therefore, most of those local products could not compete with the imported items in terms of price and appearance. Without killing the entire industrial sector, the government should have supported a few more years to some infant industries with the potential for success in a competitive environment. But in the trade liberalization, the government considered only the political interest, neglecting the interest.

After trade liberalisation, import and trading became prominent and popular economic activities in the country. Consumer preference changed from local products to imported, while investors changed their role from producing to importing and trading. Furthermore, the agriculture and industrial workforce shifted to trade and service-related activities. Small and medium entrepreneurs also moved to service sector activities such as transport, petty trading, restaurant management, personnel service etc. The banking system also changed its focus from industry and agriculture to imports, the service sector, and trade activities, which are less risky and more profitable. The industry and agriculture sectors lost policy support and human and financial resources.

Producing locally involves complicated issues such as trade union problems, land problems, technology issues, approvals, permits, paying bribes to authorities, ransoms to hoodlums etc.  Some large-scale manufacturers converted their factory buildings and other assets into stores and showrooms of imported goods. Even the government-owned large-scale industries, such as tire, steel, textile, condensed milk and powdered milk, sugar, cement, paper, petroleum products, etc., also found it challenging to compete with the cheap, nice-looking imported items. Hasty and overnight import liberalisation killed not only the infant industries but also the traditional cottage industries, such as sleeping mats, mattresses, pottery, blacksmith, toys, handlooms, vehicle repairs, lorry bodybuilding, etc., which were there for many centuries. Those disappeared from the economy as cheaper, attractive alternatives/ substitutes were available.

Despite the trade liberalisation, the government followed the privatisation policy of state-owned enterprises. Furthermore, the government dismantled some ventures, such as the marketing department, paddy marketing board, paper corporation, steel corporation, Lanka-Loha, etc., which had been established to provide essential services and inputs to support local industries. If not for wilful dismantling, some of those ventures could have been sustained without government support, even after the trade liberalisation. If transparently done, privatisation could have been a good opportunity for the government to eliminate some nonessential enterprises established under the closed economy but could not run on a commercial footing under international competition.

But due to the various malpractices, privatisation became a horrendous exercise. It paved the way for some business cronies to loot public assets. Ownership of these assets was not transferred to genuine industrialists but to the hands of government supporters looking for some fortune to become rich overnight. Most of these factories were looted by new tenants/owners and abandoned. Even though a few became successful entrepreneurs, they acquired those assets without capital outlay or much below the market price. Some got running businesses for a nominal fee or rent and had access to free working capital such as stocks of raw materials and finished products ready for sale. Genuine entrepreneurs who were not fortunate enough to enjoy such free or cheap capital found competing with lucky investors challenging and discouraging.

Privatisation was an emerging concept to reduce the burden on the government budget, improve the efficiency and quality of products and introduce the latest technology and management style of the local and foreign private sectors.  At that time, markets were not saturated for most products but were expanding rapidly due to the open economy. Therefore, the government should have encouraged and supported the private sector to establish new industries instead of haphazard privatisation of existing running businesses or importing cheap substitutes.  Privatisation should have been done carefully and transparently without distorting the investment environment. The privatisation was mishandled so the country couldn’t achieve its expected benefits.

 Ranasinghe Premadasa became the president in 1989 and was interested in poverty alleviation and rural housing. He identified the apparel industry as the most appropriate tool for sustainable (employment generation) poverty alleviation. His government launched the 200-garment factory program with an attractive support package to private sector investors to establish garment factories in rural and backward regions. This facilitated the rural women to be employed in their hometowns without migrating to Western Province. Hence real income increased, and their standard of living improved to a considerable extent. However, due to logistic problems, investors’ cost of production increased, and they lost the convenience and the timeliness of delivering finished goods and raw materials. The cheap labour could have compensated for high overhead costs in rural areas. But the labour regulation and the pressure from trade unions did not permit reaping from the cheap labour. Investors were forced to pay the same wages as in the western province. Further, finding suitably qualified managerial staff was also a constraint compromising productivity and quality.

As many developing countries entered the apparel market during this period, the competition was very high. Therefore, quality assurance and compliance with tight delivery schedules and production at competitive prices became a considerable challenge for manufacturers and exporters, losing the global market share. Some factories established in remote areas have now been closedown and concentrated again in the western province.

Countries like Thailand, Korea, Malaysia, and Indonesia used the apparel industry as a springboard to elevate as newly industrialised countries. They did not rely for many decades on the apparel industry. But even after 45 years, apparel remains Sri Lanka’s main export item because we have failed to use the apparel industry as the springboard to be a newly industrialised country. No other prominent industrial activity has emerged, at least to be on par with the appeal industry. Though many condemned it sarcastically, the dream of Mr Premadasa was for Sri Lanka to become a Newly Industrialised country by 2001. If not for the sudden assassination, he could have made a strenuous effort to achieve this goal.

 Since then, except for the privatisation of state-owned enterprises and support packages for foreign investment, there has been no specific policy support or programs targeting industrialisation. From 1994 to 2004, Mrs Kumaratunga’s government concentrated on poverty alleviation through the Samurdhi Program, peace negotiations with Tamil Militants, booting out state-sponsored terrorism, re-democratise the governance, promoting foreign investment in general without targeting any specific sector or sub-sector, or industry etc. Several state-owned enterprises were privatised during this period to reduce the burden on the national budget. In between this period, Ranil Wickremasinghe’s government, from 2002 to 2004, attempted to make far-reaching structural changes in the economy through its policy outlined in Re-Gaining Sri Lanka. Re-gaining Sri Lanka did not focus specifically on industrialisation but the overall restructuring of the economy and governing institutions, thereby reducing the government’s economic role only to regulate. However, people were not ready to face this shock of structural adjustments. The president dissolved the government at the beginning of 2004, and the Wickremasinghe government could not continue the process.

Immediately after the Tsunami catastrophe, Mahinda Rajapakse’ became the president in 2005. Due to the prolonged civil war, economic growth was slow for many years.  The power crisis was at the climax and road infrastructure was in very poor condition hampering industrialization. His immediate priority was finishing the civil war with LTTE and unifying the country. While fighting with the terrorists, he gave priority to resolving the power crisis and road infrastructure. Norochchoplai and upper Kothmale power plants projects commenced immediately and were commissioned to solve the power crisis.  A comprehensive road program, based on a 10-year plan was implemented. Three major expressways, namely the Southern Expressway, Outer Circular Expressway and Katunayake Expressways were commenced and commissioned. Further, Hambantota Sea Port and Airport were completed. In addition to the provision of infrastructure, the Strategic Investment Act was passed in the parliament to encourage foreign investments in a strategic nature. The Board of Investment was involved actively in promoting foreign investments. However, these physical infrastructures, legal provisions and institutional support have not been adequately used by investors. Capacity utilization of some infrastructure is still at a low level. Those are yet to be stimulants for industrialization. This shows that general support like BOI incentives, tax holidays and physical infrastructure alone can’t stimulate investment and industrialization.  There may be various other non-financial and non-physical constraints concerning the investment. Our position in the Ease of Doing Business index also needs to be improved.

  Conclusion and Recommendations

During the 1970/77 period, the economic crisis and scarcity of goods generated a great enthusiasm to produce many things locally. Small and medium-scale industries emerged as self-employment and small and micro enterprises in every nook and corner of the country. In contrast, though the scarcity created by the 2020/22 economic crisis is much more severe than the above, there is not much attempt by the government or the entrepreneurs to commence industries or invest in the production economy. Consumers are interested in maintaining the same lifestyle as before the economic crisis, thinking it is a temporary issue. The business community is anxiously waiting till improves the foreign exchange situation to resume import business instead of diverting the excess liquidity for local industries. The government is also focusing its strategies on improving the foreign reserves through debt restructuring and controlling inflation by contracting the economy, which may give breathing space to continue with the consumption-oriented economy as usual.

The government’s strategy seems guided by the notion that this is a short-term problem of servicing external loans, which can be resolved by artificial and temporary measures to strengthen foreign reserves.  Those immediate solutions are necessary for a breathing space to lay the foundation for structural adjustments. But it seems all stakeholders are pursuing an elusive path without considering the need for structural changes.  Instead of believing in a single answer, we must adopt multi-faceted strategies to come out of the ramified economic, political, and social situation. The country needs strategies to have a positive trade balance and a balance of payment through export-oriented economic growth and higher purchasing power of the people, for which industrialisation, based on comparative advantages, is a must. Suppose the country does not embark on growth-oriented strategies during the breathing space. In that case, the country’s economy may get settled at a low equilibrium level (low production and productivity, low demand, low income, high degree of unemployment /underemployment, low imports, and exports etc.) It would be challenging to re-energise because the economic base, such as professional and qualified human resources, international business linkages, systems, procedures, and institutional arrangements, could become fragile over a long period.

Considering the limited land resources, Sri Lanka will not be able to produce essential food items such as grains, pulses, and lentils for mass consumption on the world market or agricultural/natural raw materials for large-scale worldwide industries. Therefore, exporting agriculture products and raw materials in large volumes has little prospect for exchange earning and employment generation.  Our strategy should be: (a) gaining a higher value in the export market by adding a high degree of value to the limited supply of local raw materials. (b) Knowledge and skill-based industries. (c) high-value products for market niches. (d) tertiary sector activities targeted local and international markets, (e) Import substitution if the market is large enough to have the scale of economies. Otherwise, attempts to replace all imports with import-substituting industries will lead to high costs and low quality. It will deprive local customers of benefitting from the international comparative advantages and, finally, misallocate scarce resources (f) produce human resources of medium and high-level professionals for the global labour market. (g) Produce for the broader international market using imported agriculture and natural raw materials like the 200 hundred garment factory program.  Four or five strategic industries/ thrust areas shall be identified for this program with due consideration to the following aspects: (1) industrial products with a wider local and foreign market (2) Internationally comparative advantages in terms of access to the market, raw material and other inputs, skills, expertise etc.

 The Backward and forward linkages of selected industries must analyse and identify constraints at each point of linkages and design and implement necessary interventions including incentives, legal support, and tariff protection for a definite period. Perhaps, the electronic industry, leather products, jewellery, vehicle components, and cinnamon and coconut-based products would be good candidates.  Sri Lanka has missed many buses from dawn to evening. However, a well-designed program without ups and downs for political gains would catch a late-night bus.

Power Hunger and the Hypocrisy Bankrupted a Nation

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Over the last several months, intellectuals, politicians, and international development agencies have discussed the Sri Lankan economy and fiscal policy more than ever for its mismanagement. The words “foreign Reserves” and ‘’foreign Exchange” have become a common topic even among ordinary people who have never used those words. They talk more about the dollar than the rupee earnings and think the dollar is the panacea for all the economy’s ills. At the time of independence, the world community thought Sri Lanka would be a model economy for most developing countries. Sri Lanka was the second most prosperous country next to Japan in the Asian region. The country had fulfilled most preconditions to take off on the growth tract. However, it struggled to reach the status of a lower middle-income country for 50 years till 1997, while many other developing countries surpassed Sri Lanka. Eventually, in terms of World Bank classifications, Sri Lanka was elevated to a lower middle-income country in 1997. Since then, it has struggled in the lower middle-income trap and reached the status of an upper middle-income country in 2019, after 21 years. But, within a brief period, in 2020, under the World Bank classification, Sri Lanka was downgraded again to a lower middle-income country due to the sharpening economic crisis.

Since the transfer of ruling power from colonial masters to local elites, the fiscal policy adopted by Sri Lanka is short-sighted, irrational, arbitrary and not growth-oriented or sustainable. Those are aimed at winning the heart of constituents to win the next election and remain in power forever. The budgetary policy is nurtured as a bribe to the constituents to grab or stay in power.   Throughout history, with changes in government or leadership, policies have oscillated between growth and welfare orientation without policy consistency. Therefore, frequent ups and downs are observed in the path of economic growth. This policy inconsistency has caused catastrophic long-term and short-term economic ramifications. In the 1970s, in the journey to industrialisation, the country faced a scarcity of all imported consumer and intermediate goods due to strict import controls. Rations, coupons, and permits became part and parcel of daily life. Two prices, the control price and the black-market price, became the normal market situation for goods. People had to spend their time in queues to purchase goods for a controlled price. The policy priority was the protection and encouragement of the producer. This was done at the cost of consumer rights and preference.

 In 1978, the policy was reversed and removed all import restrictions. The market was flooded with inferior, superior, cheap, expensive, wanted, and unwanted imported goods, prioritising the consumer and consumption. The producer has been deserted without policy support. Following the open economic policy for 24 years till 2017, the year of the highest per capita GDP, the growth rate was maintained above 4%, except in 2001, when a 1.55 % negative growth was reported. In 2002, followed by a negative growth rate, the country faced near bankruptcy, with the government’s debt reaching 105.5% of the GDP. In 2002, the government made several changes in the overall economic policy, including the fiscal policy. The approach was more focused on growth than welfare. Though many opposed pruning welfare programs and privatising public enterprises, the government exerted considerable fiscal control. It trended the debt ratio downward to 90.6 % by 2005, controlled inflation and commenced the gradual economic recovery. From 2005 to 2012, the country maintained a GDP growth rate above 5%, and from 2010 to 2012, it was above 7% for three consecutive years, and the per capita GDP rose above US$ 4077 in 2017. The main contributor to this rapid GDP growth was the construction boom in the public sector infrastructure, funded under local and foreign commercial borrowings. However, there were no adequate investments in goods and service production to sustain the growth momentum generated by the construction boom. As such, the economy could not substantially reap the potential of new infrastructure. In other words, the volume of investment made in the infrastructure within a brief period was beyond the economy’s absorption capacity. The government was forced to service loans before bearing the fruits of costly investments.

As a combined effect of many inappropriate economic and fiscal management decisions and political crises, the growth rate became negligible or has fallen negative since 2018. The GDP per capita income fell from US$4077 in 2017 to US$ 3815 in 2021. An 8.4% negative growth rate has been recorded for the first half of 2022.  The government’s debt ratio exceeded 100% again in 2020 and 107% in 2021. The credit rating of Sri Lanka has been downgraded to very low by rating agencies, disabling any further borrowings. Foreign reserves depleted to near zero, compelling for rigorous import control. The government was forced to print money relentlessly to meet its essential domestic expenditure leading to hyperinflation. It eventually defaulted on the repayment of foreign loans and relegated the country to bankruptcy. Days and miles-long queues for essentials became familiar scenes everywhere in the country. Now, the destiny of the proud and conservative Island nation is in the hands of its friends and enemies.

Is it a Premediated Bankruptcy?

At the time of Sri Lanka’s independence, her macro economy was very healthy. Balance of payment, foreign reserves and balancing the national budget were not significant issues. However, after 1957, Sri Lanka’s trade balance was always negative. As a ratio to the GDP, the trade balance was above minus 6% from 1990 to 2021. Consequent to a continuous and extensive negative trade balance, balance of payment and budget deficit, the government has been highly dependent on foreign borrowing for more than six decades.  During the 1970s and 1980s government’s revenue ratio to the GDP was above 20%. But since 1991, it has declined rapidly, reaching 8.6 % of the GDP in 2021

During the 1970s, the government debt ratio to GDP was around 60 % and reached 84% in 1980. From 1990 to 2000, the debt ratio increased above 96% and went to 105.5% in 2002. After that, a declining trend was visible, dropping to 77.7% in 1915 and remaining below 79% for three years till 2017. Again, the increasing trend was accelerated, jumping the ratio from 84.2% in 2018 to 107.1% in 2021. In the early stages, the borrowing was from multi-lateral and bilateral agencies on concessionary terms. Sri Lanka denied concessionary credits for many sectors after it became a lower-middle-income country. Then the government opted for borrowing from bilateral agencies at relatively higher interest rates and medium-term repayment periods. Since 2007, Sri Lanka has issued several international sovereign bonds with maturity periods of 5 to 10 years. By the end of 2021, the total outstanding external debt of the government reached US$ 50.7 billion, of which 47% is market borrowings, which are short-term and high costs. These market borrowings were mainly used to repay previous loans. Later, the government was compelled to do market borrowing to settle previous market borrowings, entangling the country into a debt trap.

From the 1970s to the 1990s, government expenditure was around 30% of the GDP. During this period, the government revenue ratio to the GDP was also high, about 20% or above. Till 2015, the overall budget deficit was high, above 7%.  Due to the policy changes in 2015, the budget deficit decreased to 5.5% in 2017 and 5.3% in 2018.  However, with the policy reversal in the latter part of 2019, it increased again, reaching 12.2% in 2021. In addition to the policy changes, the corvid-19 pandemic also contributed to the budget deficit and demanded more government expenditure than expected. Since 2020, these deficits have been chiefly financed from local borrowings and money printings, an inflationary tool.

While struggling to find additional revenue to meet increasing public sector expenditure, the new government made a highly irrational ad-hoc decision to reduce taxes in December 2019. The maximum personal income tax rate was reduced from 24.5% to 18%, and the thresh hold of taxable income was increased from Rs.500,000 to Rs. 3,000,000. Consequently, the total number of income taxpayers decreased from 1,705,233 in 2019 to 133,445 in 2020, reflecting a 92% reduction.  The VAT rate was reduced from 15% to 08 %, and the thresh hold for VAT registration was increased from Rs.12,000 to 3,000,000, resulting in a reduction of VAT registries from 28,914 in 2019 to 8,152 in 2020, reflecting an 83 % decline.  Also, the standard corporate income tax rate was reduced from 28% to 24%.

The Economic Service Charge, Nation Building Tax, withholding tax and Debt Repayment Levy was also abolished. After replacing the PAYE system with the APIT scheme, the total number of contributors dropped to 664 828 in 2020 and lost the mechanism for regular inflow of income, which used to receive without much cost and effort.  All these changes were made effective from the beginning of 2020, pending formal parliamentary approval. According to the Central Banks Annual Report 2020, the government tax revenue in 2020 has declined by Rs 518.4 billion compared to the previous year. Considering the high price level of 2022, which is affected by hyperinflation, the revenue loss may exceed Rs. 1,100 billion. The income tax reduction increased the purchasing power of the upper middle class and the rich, which created an additional demand to import non-essential or luxury goods, exerting pressure on already sicked foreign reserves.

Even before the said tax alienation, the government had faced a heavy budget deficit, a negative balance of payment and depleting foreign reserves for many years. The government was pressured to do more local and foreign borrowings to service previous loans and continue with the welfare and development-oriented budget. This is a significant fiscal challenge faced by all governments after depleting the avenues for foreign grants and concessionary credits. The IMF and World Bank kept advising Sri Lanka to take appropriate action to improve government revenue, rationalise expenditure, and minimise corruption instead of costly commercial borrowings.

While all these ailments are in the backdrop, the government has decided to reduce taxes significantly for unknown reasons without any cost-benefit analysis. One obvious thing is that the decision is not based on economic, social, or broader political interests. According to the Central Bank Annual Report -2020, “the government implemented measures to lower the tax burden of business and individuals, thereby supporting the rebuilding of economic activities and enhancing incomes of the people”. The isolated ad-hoc policy instrument did not work, while all other harmful factors for investment remained unchanged. Instead, it negatively affected the overall economy and government budget, creating multiplier effects.

Is it a result of Ignorance or a Political Gimmick?

As explained above, a persistent budget deficit due to declining government revenue, increasing expenditure, and unfavourable trade balance became a chronic issue. After opening the economy, the fiscal policy was more weighted toward a consumption-oriented economy than a production-oriented economy.  The constituents also got accustomed to using voting power to bargain for more and more government handouts. Political parties are also accustomed to pledging more and more subsidies and free goodies in their election campaigns(bribes) instead of telling the truth to the people and facing reality.

Since 1965, Sri Lanka has sought the assistance of the International Monetary Fund on 16 occasions for bailout packages to heal economic wounds, especially the negative balance of payment. The IMF assistance is always conditional that Sri Lanka will undertake structural adjustments for the long-term sustainability of the economy. Among them, fiscal and economic reforms such as the devaluation of the rupee, controlling the government expenditure, strengthening the government revenue, reducing the budget deficit, correcting the price distortion in the market, privatising the loss-making state-own enterprises, minimising/alleviating corruption, targeting the subsidies only to the poor, supporting an export-oriented economy are the prominent recommendations/conditions.  On every occasion, the same conditions have been enforced with some modifications. However, a new requirement has been proposed for the 17th occasion in 2022, requiring negotiating with lenders for credit restructuring. On every occasion, the government has agreed to IMF conditions. But, once the bailout package is disbursed, agreed requirements are disregarded and back to loosen fiscal policy for political advantage. No political party have learned a lesson from past mistakes and keeps repeating the same. They expect camouflaging fundamental issues to mislead the donors, and the people can continue forever.  Suppose we had fully complied with the agreed requirements and continued with a growth-oriented fiscal policy and economic restructuring for several years. In that case, we could have cured the wound permanently without recurring it. But the government’s behaviour is like enabling the patient to move from the sick bed; the patient escapes from the hospital without facing the surgery.

On all previous occasions, the government approached the IMF before bankrupting the economy and benefited from bail-out packages. Since the beginning of 2020, the symptoms of the economic crisis have been visible. However, the government was reluctant to seek IMF assistance due to the possible challenging fiscal discipline that may enforce on the eve of the general election. Even after the general election, the government wanted to maintain a loose budgetary policy to accommodate popular election pledges. Towards the middle of 2021, it was clear that the economy would collapse without severe remedial actions and policy reversal. Even at this stage, the authorities did not realise the gravity of the situation and thought the same loosened policy could be continued with temporary homegrown solutions. An attempt was made to relieve the foreign exchange crisis by controlling the imports while keeping the value of the rupee artificially high. Also, the authorities believed the government could service all external borrowings without defaulting through the savings generated from import restrictions and printing money to finance the domestic expenditure, guided by the “new monetary theory”.  Available foreign reserves were used to service the external borrowings and maintain the rupee’s value artificially high. But they did not understand that this solution would deprive the people’s basic needs and collapse the domestic economy, which depends heavily on imported inputs.

At the beginning of 2022, it had proved that all homegrown solutions have miserably failed, and the country is running into a catastrophe. Towards the end of the first quarter of the year2022, the economy virtually collapsed, without foreign exchange to import petroleum, coal, gas, medicine, essential food items and many more. Eventually, the rupee was floated and allowed to depreciate. The immediate impact was the devaluation of the rupee by more than a hundred per cent pushing the cost-of-living sky high and days-long queues for all essentials, including fuel, food, and medicine. Meanwhile, the government was compelled to default on repayment of foreign loans to save the meagre foreign exchange for importing bear minimums. Due to the speculation of further devaluation of the rupee, foreign exchange earners stopped sending their earnings to the country through official channels. The country came to a standstill without inputs and mobility for industries, agriculture, and day-to-day operations for living. This resulted in multiplier effects such as constraints on industries resulting in low export income, high demand for imports, unemployment, low tax income to the government etc., creating a vicious cycle. It came to total anarchy, creating a political nightmare. Social unrest escalated to an unmanageable level, and eventually, the democratically elected president and prime minister were forced to resign.

Eventually, after failing all home-grown solutions, the government sought IMF assistance to bail out the crisis in April 2022. Then it was too late, and people and the economy suffered severely. Consequently, the recovery period will be much longer than the average IMF support program. Perhaps, it may take another five to six years to reach the per capita GDP to the 2017 level. If this decision had been taken at least in mid-2021, the recovery period could have been shorter, with less damage to the people and the economy. Relevant authorities could have bungled the episode from December 2019 to June 2002. But it isn’t easy to believe, as the president and finance minister were backed by many senior economists and experienced development administrators. Perhaps it may be the ego and deformed ideologies of the relevant authorities who are unwilling to listen to others’ views and productive criticisms. Another possibility is that some forces could have conspired by assigning bunglers to critical positions to mismanage the economy and thereby oust the non-political carrier president and capture power. This inference seems more pertinent, having observed entire political episodes from December 2019. Whatever the cause behind it, it has created long-lasting adverse socio-economic effects. Some of them are irreparable, such as child malnutrition and health hazards. Perhaps those who have abandoned farming may not be into agriculture again.

Conclusions

The limping economic legacy of over half a century has been further aggravated due to the nonsensical tax reduction in December 2019 and several other senseless decisions taken by the new government.  Accelerated unproductive government expenditure, such as recruiting 50,000 unemployed graduates and 100,000 unskilled less educated youths to the public sector, Weda Lakshayak (hundred thousand projects) and the 100,000 Km Road program, put more burden on the already unwieldy budget. Banning chemical fertilisers paralysed agricultural production. Alienating a considerable volume of government revenue, overnight switching to organic agriculture, and blindly trusting homegrown solutions for structural economic issues are the most preposterous decisions ever taken by a government. All these could have resulted from ill advice by bunglers guided by personnel agendas and deformed ideologies.

Since its independence, the power-greedy politicians competitively made Sri Lanka a nation lacking self-confidence and depending on subsidies and lives beyond its means. As a nation, Sri Lanka consumes more than it produces. To overcome this situation, we must learn to live within our means. There is no free lunch. Everything has a price. People must be ready to enter an era of new economic and political order. People must be prepared to produce more than they consume. Politicians in power should allow newcomers to take the reins and change the whole system to match the modern world instead of reinforcing the century-old corroded systems. The bureaucrats should be ready to switch on par with the contemporary world, proactive and able to drive the political masters on the right track instead of carrying forward the residua of feudal administration practices of their predecessors. All stakeholders in the governance system should be thoroughly determined to avoid financial and power corruption. We need a charismatic patriotic leader who can transform the whole society into a forward-looking, dynamic one.