The U.S. Navy’s Diving and Salvage Center can be found in a location as obscure as its name—down what was once a country lane in rural Panama City, a now-booming resort city
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Blaming the United States for letting the “balloon incident” unnecessarily create “a very unfortunate effect on Sino-American relations,” Chas Freeman said the implications of the abrupt scrapping of Blinken’s trip to China are threefold, all of which are indicative of the Biden administration’s inability to engage with China meaningfully.
The Joe Biden administration’s hysterical overreaction to a Chinese unmanned civilian airship unexpectedly entering U.S. airspace is proof of the current U.S. government’s inability to overcome domestic pressure and manage the relationship between Washington and Beijing in times of high tension, a former U.S. diplomat has said.
In an interview with Xinhua, Chas Freeman reiterated his criticism of the Biden administration’s strategy toward China that wrongfully prioritizes competition over cooperation and called on the administration to learn from the diplomatic wisdom possessed by the older generation of leaders of both the United States and China that made the normalization of ties between the two countries in the 1970s a reality.
A retired career diplomat, Freeman was a member of then-U.S. President Richard Nixon’s entourage during the president’s ice-breaking trip to China in 1972, serving as the U.S. delegation’s principal interpreter.
“THEY STRUCK ME AS HYSTERIA”
Speaking of the so-called “balloon incident,” Freeman highlighted the “clear disconnect” between the initial assessment by the U.S. military and the intelligence community of the non-threatening nature of the airship and the peddling by U.S. politicians of what they speculated to be the craft’s purpose of “espionage.”
“From the beginning, the military said this did not represent a threat of any consequence to U.S. national security. And it was the politicians who began to invent a series of theories about the use of this balloon for espionage,” Freeman said, adding the fact that the arrival of the airship coincided with a polar vortex over North America made him believe that the incident was not something the Chinese side was able to anticipate beforehand. “The course of the balloon may and well have been accidental.”
Despite China’s timely notification — based on an earnest verification — to the United Sates that the airship was used for meteorological research and unintentionally entered U.S. airspace, Washington overreacted to the isolated incident by shooting down the airship, claiming that China has a so-called high-altitude surveillance balloon program and imposing sanctions on Chinese companies it alleged are linked to the program.
“They struck me as hysteria,” Freeman said of U.S. perceptions about and reactions to the incident. It was “a kind of almost psychotic reaction to an event in which facts were set aside and replaced by conspiracy theories.”
Wang Yi, director of the Office of the Foreign Affairs Commission of the Communist Party of China Central Committee, had an informal contact with U.S. Secretary of State Antony Blinken on Saturday in Munich, Germany, where they were both attending the 59th Munich Security Conference participated by world leaders.
“If the U.S. side continues to fuss over, dramatize and escalate the unintended and isolated incident, it should not expect the Chinese side to flinch,” Wang told Blinken when setting forth China’s strong position on the “balloon incident,” according to a statement from the Chinese Foreign Ministry.
Freeman said he agreed “completely with the Chinese statement that this was an overreaction” by the U.S. side.
It is “unfortunately not uncommon” for the United States to exaggerate the nature of this unintended accident, he added, given that the country is currently plagued by domestic political polarization.
On the revelation from the Chinese side that the United States illegally flew high-altitude balloons into Chinese airspace multiple times to surveil intelligence information, Freeman said he suspected “maybe there is” a U.S. balloon program that’s still in existence, noting “the United States in the 1950s had a very active program of using balloons for military targeting purposes over the Soviet Union.”
He suggested that the United States and China discuss “what kind of overflight at what altitude is permissible,” so that the flight of high-altitude aerial objects can be governed by either certain “legal standards” or “perhaps some kind of arms control agreement.”
“APPARENTLY WE ARE POLITICALLY PARALYZED”
As part of U.S. response to the balloon incident, Blinken postponed his trip to Beijing originally scheduled for early February.
In the view of Freeman, one of Blinken’s intended goals for the planned China trip was “a domestic political posturing” to show Americans at home that the Biden administration was “just as tough on China as the Donald Trump administration was.” Now the “cancellation of the visit did exactly the opposite,” he said.
Blaming the United States for letting the “balloon incident” unnecessarily create “a very unfortunate effect on Sino-American relations,” Freeman said the implications of the abrupt scrapping of Blinken’s trip to China are threefold, all of which are indicative of the Biden administration’s inability to engage with China meaningfully.
“First, it appeared to show that the United States and China cannot talk under conditions of tension,” he said. “That is very unnerving to the world. It is a matter of grave concern not just to Americans and Chinese who follow these things, but to many in other countries.”
“Second, we showed that we do not know how to manage this relationship in conditions of crisis. And that, too, is a matter of concern,” he said. “And third, we showed not that Mr. Biden was politically strong, but that he was weak. He could not stand up to domestic political pressure.”
“Apparently we are politically paralyzed in the United States and prevented from taking any initiative to address the first two questions: Can we talk? Can we manage the relationship,” said Freeman.
In recent days, the Biden administration’s public messaging on China has been self-contradictory.
In what U.S. media interpreted as a move to contain the further fallout of the balloon episode, U.S. Vice President Kamala Harris told Politico in a recent interview that she didn’t think U.S.-China relations would be impacted by the incident.
Days later, when Harris was in Munich meeting with leaders of France, Germany and Britain, “the challenges posed by China” was a recurring topic during the respective interactions. It’s hard for anyone not to read into this as a sign of the Biden administration stepping up its alignment with allies against China.
“I have been a critic of the formula that the Biden administration has adopted for U.S.-China relations,” Freeman said.
“They begin by saying we will compete. We are in a competition, but we will cooperate in a few areas where that is mutually advantageous. I think that’s the wrong order. We should be focused on cooperation, and at the same time acknowledge that in some respects we will compete. So the question is the priority that you assign,” he said.
Freeman categorizes competition into three forms — “rivalry,” a positive process where the two competing parties seek to excel and ultimately result in self-improvement by both; “adversarial animosity,” a zero-sum competition like a running race where one party tries to “trip” rather than “outrun” the other party; and “enmity,” a destructive mode where one party fight for the complete annihilation of the other party.
The word “competition,” Freeman said, has been used by the Biden administration as a “euphemism” and in way that makes the concept hardly distinguishable from “animosity and hostility.” The result is that the United States, by failing to accurately describe the status of its relationship with China, has driven bilateral ties into the phase of adversarial animosity.
Freeman lamented the fact that “empathy,” which he said is required in diplomacy and was shown by both the U.S. and the Chinese sides when Nixon visited China, is nowhere to be found among those making decisions on China in the current U.S. administration.
“Empathy is understanding where the other side is coming from, what they believe, how they see things,” Freeman said. “You must understand the other side’s point of view. I don’t see much evidence that there’s much effort being made to do that on the American side.
– Xinhua
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In the last nine years after Mr. Narendra Modi assumed office as Prime Minister of India, there is no doubt that India has achieved significant progress and has made rapid strides in multiple directions. Several infrastructure projects, welfare programmes, proactive policies towards industrial development and number of reform measures have been implemented. However, one area where there is not much of difference is in the level of corruption at different levels all over India.
While Mr.Modi has ensured that top administration in central government is nearly transparent without corrupt dealings, this is not so in the case of lower level of administration and in several states in the country.
Cross section of people living in various parts of India in different age groups, educational level and economic strata are of the view that the most serious problem confronting India today is the widespread corruption in government departments and public life. Not only several politicians, bureaucrats, but government employees at various levels are also indulging in corruption, widespread corruption is prevalent in private educational institutions, private hospitals, real estates and even in places of worship and other areas from bottom level to top level. Of course, occasionally , it is also seen that there are honest and incorruptible people in government departments and public and private sector organisations. They are few and far between. The non-corrupt person today is considered as an exception rather than a rule.
It is extremely distressing to note that many people have started thinking that corruption is the order of the day, whether in private or public sector activities. As a matter of fact, corruption has become cyclical , in that one person who takes bribe at one place also gives bribe at another place to get things done.
In spite of such conditions, Prime Minister Modi remains as the most popular leader in the country enjoying public confidence, as people believe that he is a man of great personal integrity and if anyone in India can root out corruption in India today , this cause can be achieved by only Prime Minister Modi.
On more than one occasion, Mr. Modi has said or give an impression by his decisions that the best way of rooting out corruption in India is by making changes in the system of transaction and administration. He has been stressing on the importance of massive and large scale digitalization as the best method of promoting transparency and rooting out corruption.
Mr. Modi has taken some steps in this regard by opening zero bank account for millions of poor people in India and ensuring that welfare fund for the poor people including agricultural farmers would be provided by bank transaction, so that middle men would be avoided and syphoning of the fund would be eliminated. This is good as far as it goes ,but certainly many other stronger steps are needed.
It is well known that most of the corrupt dealing takes place in the form of cash transaction. Therefore, high level of digitalization and minimum amount of currency in circulation is the strategy and pre condition that is required to root out corruption.
While the level of digitalization in the country has been steadily increasing, unfortunately the currency circulation has also increased to high level.
The currency circulation in value terms has soared from ₹17.74 lakh crore on November 4, 2016, to ₹32.42 lakh crore on December 23, 2022. Currency in circulation, which was ₹18.04-lakh crore in end-March 2018, jumped to ₹31.34-lakh crore in end-March 2022 and further to ₹32.42-lakh crore as on December 23, 2022.
With huge currency in circulation, many raids carried out by investigating agencies like enforcement directorate, Income tax authorities have seen huge bundle of currency notes worth several crore of rupees kept in the raided premises. Obviously, this bundle of currencies are the black money and corrupt money accumulated by evading taxes and indulging in corrupt dealings.
While campaign for honesty in public and private life by various sources have been taking place for long time in the country, this has not seen any reduction in the level of corruption in India. The repeated catching of corrupt persons by vigilance department have also not yielded much benefits ,as they are only the tip of iceberg.
The only way is to reduce rapidly the circulation of currency note in the country, which inevitably would lead to greater level of digitalization and transparency in transactions and bring down the currency led corruption. The recent rapid increase in currency circulation by Reserve Bank of India is a mistake with serious adverse consequences.
This situation has to be retrieved by steadily decreasing the level of high value currency notes in circulation.
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by Our Economic Affairs Correspondent
“The IMF’s emphasis on fiscal austerity has proven to be misguided and has resulted in economic stagnation, high levels of unemployment, and increased poverty in many countries.” – Noam Chomsky
Sri Lanka is eagerly anticipating change. Sri Lankans are tired of being robbed by many parties, be the local or foreign. Recently, politicians who were on the run have been now secured their safe houses, while innocent people are being targeted with usual measures. This has been attributed to the International Monetary Fund (IMF), a well-known international financial institution that relies on the support of others. Even those in rural areas who previously showed little interest in the IMF are now discussing its role in the country.
However, the IMF is not a charity, and it is not expected to resolve Sri Lanka’s crisis. Instead, it will provide guidance similar to an accountant overseeing the accounts of a struggling company. Unfortunately, neither the IMF nor the power-hungry politicians in Sri Lanka seem to genuinely care about the country’s crisis. We must thank Gotabaya Rajapaksa for unmasking, knowingly or unknowingly, the issues that Sri Lanka faces, and for forcing Sri Lankans to acknowledge the country’s state. If the IMF is honest in its efforts, it should explain why their interventions failed the last 16 times Sri Lanka sought assistance. Could Sri Lanka become the next Jamaica, with the IMF taking control? We must take a closer look.
No doubt, the International Monetary Fund (IMF) has been a key player in the global economy since its creation in 1944. The IMF provides loans and technical assistance to countries facing economic challenges, with the goal of promoting economic stability and growth. However, there are many examples of IMF policies and loan conditions that have had negative consequences for the countries they were intended to help. One of these examples is Jamaica, where IMF policies have been blamed for exacerbating economic inequality and hindering long-term development.
Jamaica is a small island nation in the Caribbean, with a population of just under three million people. Like many other countries in the region, Jamaica has faced significant economic challenges over the years, including high levels of debt, inflation, and unemployment. The country has received multiple loans from the IMF over the past few decades, with the most recent loan approved in 2016. However, many Jamaicans feel that IMF policies have only made their economic situation worse.
One of the key criticisms of IMF policies in Jamaica is the focus on austerity measures, which often require the country to reduce public spending and increase taxes. These measures have been particularly harmful to the poorest sections of the population, who are most vulnerable to economic shocks. In Jamaica, the government has implemented a series of austerity measures over the years, including cutting social spending and increasing taxes on essential goods such as electricity and fuel. These measures have contributed to an increase in poverty and social inequality, as well as undermining the country’s long-term development prospects.
Another criticism of IMF policies in Jamaica is the focus on privatization and liberalization. These policies have led to the sale of state-owned assets, such as utilities and transportation, to private investors. While these policies may lead to short-term gains, they can have negative consequences in the long run. For example, privatization can lead to higher prices for essential services, as private companies seek to maximize their profits. This can further exacerbate the economic challenges faced by the poorest sections of the population, who may not be able to afford these higher prices.
In addition to these specific policies, some critics argue that the overall approach of the IMF is too focused on short-term fixes and not enough on long-term development. IMF loans often come with rigorous conditions that require the borrowing country to implement specific policies or undertake specific reforms, but these conditions may not address the underlying structural issues that have contributed to the country’s economic challenges. This focus on short-term fixes can make it difficult for countries like Jamaica to build a sustainable and resilient economy that benefits all its citizens.
Well, Jamaica is not alone. There are several other examples of countries where IMF policies have been criticized for their negative impact on the economy and society.
If the IMF fails in Sri Lanka, it will be just a case study for them, but it is the fate of more than 22 million people. Who will take note of this seriously when those in power are playing modern-day Nero?
One such example is Argentina, which has a long history of economic instability and has been a frequent borrower from the IMF. In 2018, Argentina received a $57 billion loan from the IMF, the largest loan in the organization’s history. However, the loan came with strict conditions, including austerity measures and cuts to social spending. Critics argued that these policies exacerbated economic inequality and contributed to a deepening recession in the country. Consequently, according to Xinhua, “Argentina recorded 98.8 percent year-on-year inflation in January, after starting the year with a monthly price increase of 6 percent, the National Institute of Statistics and Censuses (INDEC) reported Tuesday, 14 February 2023.”
Another example is Greece, which received multiple loans from the IMF and other international lenders during the debt crisis that began in 2009. These loans came with conditions that required the Greek government to implement austerity measures and structural reforms. However, these policies were deeply unpopular with the Greek people and contributed to social unrest and political instability in the country. Many argue that the IMF’s focus on austerity measures delayed Greece’s economic recovery and hindered its long-term development.
A third example is Zambia, which has received multiple loans from the IMF over the past few decades. Critics argue that the conditions attached to these loans, which often require the government to reduce public spending and increase taxes, have contributed to social inequality and undermined the country’s long-term development prospects. For example, the IMF’s requirement for Zambia to reduce public spending on healthcare led to a decrease in the availability of essential medicines and equipment, making it harder for people to access healthcare services.
These examples illustrate the complex and often controversial role that the IMF plays in the global economy. While the organization’s loans and technical assistance can be helpful in promoting economic stability and growth, there are concerns about the impact of its policies on the poorest sections of society and on long-term development prospects. As such, it is important for the IMF to take a more comprehensive and long-term approach to its lending policies, one that prioritizes sustainable and inclusive development over short-term fixes.
True, it is difficult to predict whether Sri Lanka will become another Jamaica, Greece, or Argentina, but there are certainly concerns about the impact of IMF policies on the country’s long-term economic and social development. Sri Lanka has received loans from the IMF 16 times in the past and is currently negotiating its 17th bailout, with the aim of addressing the country’s ongoing economic challenges, including high levels of debt, inflation, and unemployment.
To avoid the negative consequences of IMF policies seen in other countries, Sri Lanka could consider adopting some of the recommendations put forward by top economists and experts in the field of development economics. One key recommendation is to focus on sustainable and inclusive economic development, rather than short-term fixes and austerity measures. This could involve investing in infrastructure, education, and other long-term development initiatives, with a focus on creating jobs and promoting economic growth in a way that benefits all citizens.
Another recommendation is to address the underlying structural issues that have contributed to the country’s economic challenges, such as corruption, inefficiency, and poor governance. This could involve implementing reforms to improve the business environment, increase transparency, and reduce bureaucracy, which could help to attract investment and create a more vibrant and dynamic economy.
In addition, Sri Lanka could explore alternative sources of funding and technical assistance, such as regional development banks or partnerships with other countries. These alternatives may offer more flexibility and a more nuanced approach to development challenges, which could better address the specific needs and priorities of the country.
Overall, Sri Lanka has a challenging road ahead as it seeks to address its economic challenges and promote sustainable development. To avoid the negative consequences of IMF policies seen in other countries, it will be important for Sri Lanka to take a comprehensive and long-term approach to economic development, one that prioritizes the needs and interests of all its citizens.
Sri Lanka, a beautiful island nation in South Asia, has been facing severe economic challenges for decades. Despite multiple interventions by the International Monetary Fund (IMF), the country’s economic crisis has not been resolved. In fact, Sri Lanka is currently seeking its 17th loan from the IMF, but there are doubts about the effectiveness of this latest effort to address the country’s economic woes. Why Sri Lanka has not been able to solve its economic crisis, and why the ongoing 17th IMF loan may lead to social turmoil without producing a lasting solution?
Sri Lanka’s economic challenges can be traced back to the country’s long-standing civil war, which lasted for nearly 30 years and ended in 2009. The conflict caused significant economic damage, and the country’s post-war economic recovery was slow. Moreover, the country’s high levels of public spending, corruption, and lack of investment in key sectors such as infrastructure have contributed to a sustained economic crisis. These challenges have been compounded by the COVID-19 pandemic, which has further weakened the country’s economy.
The IMF has been a key partner of Sri Lanka in its efforts to address its economic challenges. The IMF has provided loans to Sri Lanka for 16 times in the past. However, despite these efforts, the country’s economic situation has not improved significantly. There are several reasons why the IMF’s interventions have not been successful in addressing Sri Lanka’s economic crisis.
First, the IMF’s loan programs often require the borrowing country to implement strict austerity measures, such as reducing public spending and increasing taxes. These measures can have a significant impact on the poorest sections of the population, who are often the most vulnerable to economic shocks. In Sri Lanka, the government has been reluctant to implement these measures, fearing the political backlash that could result from public protests and unrest.
Second, the IMF’s loan programs are typically focused on addressing short-term economic challenges, such as balancing the budget or reducing inflation. These measures may not address the underlying structural issues that have contributed to Sri Lanka’s economic crisis, such as corruption, weak institutions, and lack of investment in key sectors. Without addressing these structural issues, any short-term gains achieved through IMF programs are unlikely to be sustainable.
Third, the IMF’s loans often come with conditions that require the borrowing country to undertake significant economic reforms, such as liberalizing the economy or privatizing state-owned enterprises. These reforms can be politically challenging and may not be implemented effectively if there is insufficient political will or capacity to do so.
Given these challenges, the ongoing 17th loan from the IMF may not produce a lasting solution to Sri Lanka’s economic crisis. The loan program is expected to include conditions that require the government to undertake significant economic reforms, including reducing public spending and increasing taxes. These measures are likely to be politically unpopular, and the government may face significant public protests and unrest if it attempts to implement them.
Sri Lanka’s economic crisis is a complex and multifaceted challenge that requires a long-term, sustainable solution. While the IMF has been a key partner in Sri Lanka’s efforts to address its economic challenges, the organization’s loan programs may not be sufficient to address the country’s underlying structural issues. Without addressing these underlying issues, any short-term gains achieved through IMF programs are unlikely to be sustainable.
Sri Lanka needs a comprehensive, long-term strategy that addresses its underlying economic and social challenges, including corruption, weak institutions, and lack of investment in key sectors. The government must prioritize addressing these structural issues and work towards building a more resilient and sustainable economy that benefits all Sri Lankans.
While the IMF can be a valuable partner in this effort, the government must take a leadership role in driving the necessary reforms and ensuring that they are implemented effectively. Without a sustained and comprehensive effort to address its economic challenges, Sri Lanka’s economic crisis is likely to persist, causing further harm to its people and undermining its long-term stability and development. Consequently, no wonder if Sri Lanka becomes the IMF’s new Jamaica.
Nothing better than take the sage words of a well-known economist, Joseph Stiglitz, “the IMF has a history of imposing harsh economic policies on developing countries, which often lead to social and economic turmoil, and are designed to favour the interests of wealthy creditor nations and international corporations over those of debtor countries.” If the IMF fails in Sri Lanka, it will be just a case study for them, but it is the fate of more than 22 million people. Who will take note of this seriously when those in power are playing modern-day Nero? Real Nero never did that, but in our time Neros, certainly will.
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Corruption is a persistent problem in many countries, including Sri Lanka. It hinders economic development, undermines public trust in government, and erodes the rule of law. One solution that has been successful in combating corruption is the Hong Kong Style anti-corruption mechanism. In this article, let me explore why Sri Lanka needs such a mechanism and how it could be implemented.
Firstly, let’s look at what the Hong Kong Style anti-corruption mechanism entails. Hong Kong’s Independent Commission Against Corruption (ICAC) was established in 1974 and has since become a model for effective anti-corruption measures. The ICAC is an independent agency that investigates and prosecutes corruption cases without interference from the government. The agency has a high success rate in convicting corrupt officials and has been instrumental in reducing corruption in Hong Kong.
Sri Lanka, on the other hand, has a long history of corruption. According to Transparency International’s Corruption Perceptions Index, Sri Lanka ranks 94 out of 180 countries, indicating a high level of perceived corruption. Corruption in Sri Lanka is widespread and affects all levels of society, from the police to politicians to public officials. The country has faced several high-profile corruption scandals in recent years, including the Central Bank bond scam, which led to a loss of over $11 million.
The current anti-corruption mechanisms in Sri Lanka have proven to be ineffective in combating corruption. The existing anti-corruption bodies lack independence and often face political interference. The Bribery Commission, which is responsible for investigating corruption cases, has been criticized for being understaffed and underfunded. The legal framework for combating corruption is also weak, with low penalties for corruption offences.
A Hong Kong Style anti-corruption mechanism could be the answer to Sri Lanka’s corruption problem. The mechanism would involve establishing an independent commission, similar to the ICAC, that would have the power to investigate and prosecute corruption cases. The commission would have the resources and the authority to operate independently of the government and other institutions.
The commission would also be responsible for educating the public on the dangers of corruption and promoting transparency and accountability in government. The commission could work with civil society organizations, the media, and other stakeholders to raise awareness of corruption and promote good governance.
To implement a Hong Kong Style anti-corruption mechanism in Sri Lanka, several steps need to be taken. Firstly, the government must demonstrate a commitment to combating corruption by establishing an independent commission and providing it with the necessary resources. The commission should also have the power to investigate and prosecute corruption cases without political interference.
Secondly, the legal framework for combating corruption needs to be strengthened. Penalties for corruption offences should be increased, and the legal process for prosecuting corruption cases should be expedited. The government should also consider enacting a law on whistle-blowing to protect those who report corruption.
Finally, the public needs to be educated about the dangers of corruption and the importance of transparency and accountability in government. The commission could launch a public awareness campaign to raise awareness of corruption and promote good governance.
In conclusion, Sri Lanka’s corruption problem is a major obstacle to economic development and good governance. The current anti-corruption mechanisms are ineffective, and a Hong Kong Style anti-corruption mechanism could be the answer to combatting corruption in the country. Establishing an independent commission, strengthening the legal framework, and promoting public awareness of corruption are necessary steps to ensure the mechanism’s success. The government and civil society organizations should work together to implement these measures and ensure a corruption-free future for Sri Lanka.
Bottom line is that as the late leader of Singapore, Lee Kuan Yew says, “the fight against corruption is not a fight that can be won by government alone. The ultimate solution lies in the attitudes and values of the people.”
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Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe has disregarded and trivialised the extent of illicit financial flows through trade mis-invoicing in instigating Sri Lanka’s ongoing foreign exchange and fiscal crisis. This was fully apparent at the Parliamentary Committee on Public Finance meeting on January 23rd in response to revelations made by us as a collective of Sri Lanka’s prominent trade unions, mass organisations, professionals and economists.
In response to questions raised by Parliamentarians on our statement at the Committee meeting, the CBSL Governor responded,
“Obviously people who do under-invoicing or over-invoicing happens basically to evade taxes. If you have taxation, you declare low value and pay low taxes and then they keep money. probably they keep it out or bring it here. That’s their business. We don’t know.”
The Governor of the country’s Central Bank continued to rationalise or mis-rationalise his admitted ignorance by speaking in a language which is alien to economists, saying,
“Other thing is, I don’t believe this number. Reason is if exporters are doing business here, they can’t keep that amount of money abroad.”
After hearing this, we as citizens are concerned whether the operations of the CBSL are in fact moving forward on the erroneous personal beliefs of the CBSL Governorat this time of deep economic crisis. Since the CBSL Governor ‘does not know’, we as trade unions, civil society organisations, economists and concerned professionals find the need to enlighten him, CBSL Officials and all concerned citizens the extent and dynamics of trade mis-invoicing in accelerating Sri Lanka’s economic collapse. In the following account we will critically address the misleading remarks of CBSL Governor on capital outflows through trade mis-invoicing.
International Recognition that Trade Mis-invoicingis Not a Myth
The CBSL Governor dismissed the findings of Global Financial Integrity (GFI) report published in December 2021 which pointed out that an estimated US$ 40 billion was transferred out of the economy between 2009-2018 through fraudulent invoicing by corporates operating in the import-export sector. This figure significantly exceeds Sri Lanka’s foreign debt of US$ 36 billion in default since April 2022. The impact of capital outflow of this magnitude on the ongoing economic collapse is self-explanatory. Nevertheless, the CBSL Governor is of the view that corporates would not have sufficient funds to operate within the economy if such a large sum of capital is held outside the country. Consequently, he falsely concludes that the GFI estimates are extreme exaggerations. This amounts to a complete misunderstanding of illicit outflows globally. If not, it indicates that the CBSL’s Governor and officials are colluding with business interests and the political establishment to trivialise and dismiss what appears to be the largest financial crime in Sri Lankan history.
These outflows are surpluses from both legal and illegal operations and therefore are not reutilised in domestic operations and in the interest of expanding industries locally. Economists such as Professor Arun Kumar at Jawaharlal Nehru University, New Delhi, have pointed out that the illegal outflow of capital is used to acquire property abroad or in conspicuous luxury consumption. In other words, illicit financial outflows enable the extravagant enrichment of individuals at the expense of entire countries in the third world.
However illicit financial flows are a common occurrence in countries which have poor financial controls. For instance, theUN referring to the GFI report published in 2014 recognised that illicit financial flows from the African continent through trade mis-invoicing from 1970 to 2009 is a staggering four times the aggregate foreign debt of the region.Furthermore, the UN Conference on Trade and Development (UNCTAD) in September 2020 revealed that an estimated US$ 88.6 billion leaves the African continent as illicit capital flight yearly and the aggregate outflows between 2000-2015 (US$ 836 billion) is far greater than total foreign borrowings of the continent (US$ 770 billion).
The ground-breaking findings of GFI and their collective work with the UN, the World Bank and the IMF advocated including illicit financial flows in the UN’s Sustainable Development Goals in 2015 under goal 16.4 to which Sri Lanka is also a signatory. As early as September 2018, Mr. Juan Pablo Bohoslavsky, the UN’s Independent Expert on Foreign Debt and Human Rights for 2014-2020 stated following his visit to Sri Lanka that “no study or official estimation of illicit outflows or inflows has been conducted to date in Sri Lanka”. In his report, he urged the Government “to conduct these studies in order to further curb illicit financial flows in line with the Sustainable Development Goals.”
Further, the Asian Development Bank (ADB) in 2003 emphasized that “inaccurate pricing (“misinvoicing”) of imports or exports [is used] to hide the transfer of funds. When such transactions are extensive, the impact on a country’s entire external sector can be substantial” (ADB,Manual on Countering Money Laundering, 2003). In 2017, the ADB further estimated that trade mis-invoicing accounts for a staggering 83% of all illicit capital outflows from developing countries. The recent statement endorsed by 182 globally renowned economists, academics and activists demanding cancellation of Sri Lanka’s foreign debt also highlighted that capital outflows during the past 15 years is estimated to be greater than Sri Lanka’s total outstanding foreign debt.
There is thus a vast body of research conducted by institutions such as the ADB, IMF, World Bank, OHCHR, UNCTAD and international economists on what happens to national economic development when rampant corruption is allowed through illicit financial flows. It is therefore hugely concerning that our CBSL Governor ‘does not believe’ and does not seem to be aware of the impact illicit financial flows through trade mis-invoicing have hadon the Sri Lankan debt crisis. Ultimately, it is a tragedy that Sri Lanka’s foremost authority on economic affairs is completely oblivious to chronic issues engulfing the developing world and the root causes of the fiscal crises we face. Alternatively, if this is not ignorance or misunderstanding, then it points to deliberate collusion by the CBSL’s Governor and his officials with business interests and the political establishment to trivialise and dismiss what are massive financial crimes.
Government Enabling of Illicit Capital Flows
We are well aware that the Sri Lankan Government ‘legally’ permitted companies to park income outside the country for years and that this economic hara-kiri was only addressed in October 2021 through a regulation under the Monetary Law Act. It is our interest as citizens to know the full impact of this disastrous blunder. We demand that the CBSL publicise the amount of residual income that the export sector failed to repatriate between the period October 2021 to date, thereby aggravating the economic crisis. We further request institutions such as the CBSL to be responsible and reflect on the implications of the ‘legality’ of enabling local companies to take capital on a developing economy like ours’ in the long run. We are glad to note that the CBSL Governor is aware of other developing countries such as India and Malaysia which have placed restrictions on financial flows as part of a policy framework to accelerate their development with the capital produced in their own countries.
CBSL Governor passing the buck to Customs
In a separate press conference on January 26th,Dr. Nandalal Weerasinghestated it is the responsibility of the public to inform the Financial Investigative Unit (FIU) of CBSL and Customs Department if they have conclusive evidence of firms involved in fraudulent trade invoicing.It is only then he claimed that the FIU of CBSL and Customs Department can take appropriate legal measures against the perpetrators. He further stated it is the responsibility of Customs Department to address mis-invoicing and not of the CBSL. These assertions indicate the reluctance of CBSL to recognise and investigate illicit outflows. It is shocking to hear from the Governor that it is the general public who should provide information or advise CBSL on highly technical matters like illicit capital transfers when the CBSL employs the greatest number of Ph.D.holders under one institution in Sri Lanka. Furthermore, it is clearly stated throughout the Monetary Law Act, No. 58 of 1949 that the CBSL bears the responsibility and authority to address issues threatening the economic stability and economic wellbeing of the general public. Hence,the CBSL cannot simply abdicate responsibility by passing the mantle to Customs Department and the general public.
Export profits are only a fraction of capital transfers through trade mis-invoicing
During the Parliamentary Committee on Public Finance meeting,the CBSL Governor further claimed that capital flight through trade mis-invoicing is tantamount to shifting profits to an overseas destination for tax avoidance. However, this is a gross understatement of the gravity of the issue. We have shown in our earlier statements that the over-invoicing of imports transfers out foreign exchange received as foreign borrowing and even workers’ remittances. This compounds the foreign debt crisis, leads to chronic shortages of foreign exchange to finance essential imports and a collapse of living conditions. A study based on 39 African countries illustrates that between 1970 and 2010 approximately 63% to 73% of foreign borrowing exited Africa within a five-year window as a result of capital flight through trade mis-invoicing. Further, the IMF in its publications over the years shows that the loss of foreign reserves of Central Banks is accelerated by capital flight through trade mis-invoicing while decreasing tax revenue.It diminishes governments’ debt-servicing capacity and worsens the incidence of balance of payments crises. Capital outflows are a diversion of domestic savings out of the economy and deplete domestic resources, compelling governments to absorb more and more foreign debt to finance domestic investments, and exacerbating debt unsustainability. Needless to say that these observations are clearly applicable to the course of Sri Lankan economy over the past three decades as we have emphasised repeatedly in earlier statements.
“IMF Budget” for the People, Non-IMF Concessions for Corrupt Businessmen
The government is imposing an ‘IMF budget’ on Sri Lanka, making life unbearable to ordinary Sri Lankans, particularly working and poor people. We hope that the CBSL Governor is able to see the ground from the tall towers he occupies and observe how people are not eating any longer because they can’t afford food; have restricted even essential travel for medical and educational purposes; live in the dark because electricity has become a luxury; and have children not going to school because of hunger and costs. His ‘belief’ is costing the lives of millions in Sri Lanka. Hence, we as trade unions, civil society organisations, economists and concerned professionals ask the obvious question – Why has the Government failed to move an inch on the observations and recommendations of institutions such as the IMF on illicit financial outflows? Why is the Government burying its head in sand while their friends, the business elite, loot money out of this country and deny our country of much-needed foreign exchange?
The CBSL should therefore immediately implement a coordinated mechanism integrating itself with commercial banks and the Customs Department to investigate the issue and repatriate illicitly transferred, funds starting from most recent transactions. Instead of speculating on the credibility of GFI and the extent of trade mis-invoicing which are already recognised by international organisations like the UN, World Bank, IMF and ADB, the CBSL should collaborate with GFI and UNCTAD to further clarify the findings on Sri Lanka that emerged from 2021GFI report. In the absence of no such an initiative being even proposed by the CBSL Governor, we can only conclude thatthe CBSL is complying with the criminal corporate-political corruption that has driven the economy to the ground and ordinary Sri Lankans into destitution.
Swasthika Arulingam, President, Commercial and Industrial Workers’ Union, United Federation of Labour
Signed on behalf of: Centre for Community Empowerment,Ceylon Bank Employees’ Union,Ceylon Federation of Labour,Ceylon Teachers’ Union,Dabindu Union,Engineers’ Services Professional Association,Federation of Media Workers’ Trade Union, Institute for People Engagement and Networking, Mass Movement for Social Justice, Movement for the Defence of Democratic Rights,Movement for Land and Agricultural Reform,Movement for Plantation Peoples’ Land Rights, National Collaboration Development Foundation,National Trade Protection Council, North South Solidarity Group, Professionals’ Centre for People,Protect Union, Satahan Media,Rural Development Foundation, Social Institute for Development of Plantation Sector,Sri Lanka All Telecommunication Employees’ Union,Stand Up Workers’ Union,Suriya Shakthi FoundationNuwaraEliya,Textiles Garments and Clothing Workers’ Union,United Fishermen’s and Fish Workers’ Congress,Upcountry Civil Society Collective, UvaShakthi Foundation,Young Lawyers’ Association
SugathKulathunga–Former Senior Advisor at International Trade Centre (WTO/UNCTAD), Former Director General of Sri Lanka Export Development Board and Former Additional Secretary to Ministry of Trade, Prof. (Dr.) M. P.S. Magamage – Former Chairman of National Livestock Development Board,Dr. KalpaRajapaksha – Senior Lecturer in Economics,AmaliWedagedara – Political Economist and PhD Student, DhanushaPathirana– Economist
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At a gathering of women for a home cooked meal at Thai Pongal, a Hindu harvest festival, in the Eastern Province of Sri Lanka, a Muslim woman remarked that last year 65 young girls in her community were married-off before their O’ Levels. The women listening knew that the economic crisis was driving families to take desperate measures. They questioned as to why the law was unable to protect these children from early marriages. The conversation quickly turned to the lack of reform of the Muslim Marriage and Divorce Act (MMDA), which still permits the marriage of Muslim girls as young as 12 and even younger with the permission of the Quazi.
Meanwhile, we were told of meetings across the country led by certain Muslim religious leaders calling for communities to reject any forthcoming reforms proposed by the Government. One preacher had ferociously defended the position that girls should be able to marry even at the age of nine and claimed that women becoming Quazis (judges) was dangerous. A woman celebrating Pongal asked me with concern, “Can’t you talk to your religious leaders and explain to them that it’s good for children to finish their education?” Her question sparked a feeling of solidarity but also a hopelessness that Muslim women feel about the harm that continues daily under the MMDA hung heavy in the air. “No one listens…they do not care,” I replied, feeling frustration and sadness.
The road to reforms has been frustratingly long
For over 40 years, Muslim women and men have worked towards reforming the Muslim Marriage and Divorce Act (MMDA). Muslim women’s organisations have been in the forefront of calling for reforms, as they have borne witness to the devastating consequences of failing to reform this law. After thousands of individual testimonies have revealed experiences of injustice and cruelty, several government and non-governmental committees repeatedly suggesting reforms and countless meetings with successive Presidents, Prime Ministers, Ministers of Justice, religious administrators and clerics, the long-awaited reforms appear to be precariously moving forward. However, what could be the last mile of this long journey, is facing every challenge that can be thrown its way.
Progressive reforms will strengthen MMDA’s adherence to Islamic values
Values attributed to any religion are always historically situated and the practice and application of fundamental values are constantly evolving across time. With this understanding, it is important to acknowledge, at the outset that the MMDA is a colonial piece of legislation. It is based on the Dutch-introduced “Special Laws relating to Moors or Mohammedans and Other Native Races” and was maintained and codified into statute under the British. Contrary to claims, it is far from divine in its words, procedures and the official positions it creates. In fact, it is a mélange of some Batavian Islamic rulings as codified by the Dutch, Tamil custom (Kaikuli) and English procedural rules.
The MMDA also fails to mention the uniquely Islamic practices of a marriage contract, mata’a (alimony), Mubarak (divorce by mutual consent) and Khula divorce regimes and legal protections for property of the wife.
The MMDA as it stands now is far from Islamic. In its current form, the ways in which it is misused, and its implementation, it is a departure from the radical thinking that Islam championed, of equal and sometimes preferential status afforded to women. Women’s testimonies about their treatment under MMDA are a depressing account of how distant from the core Islamic values of justice, compassion and kindness the law actually is. The proposed reforms address many of these issues and in fact steers the law towards a more Islamic, and democracy and rule of law compliant system.
Reforms are caught between a politics of misogynistic power, fear, hate and non-interference
The process of reforming the MMDA contends with pressures from multiple sides. A fear of women holding office, gaining opportunities to assert financial rights and to hold husbands accountable when they enter polygamous marriages without caring for the existing family is palpable in the debates.
The deeply un-Islamic and unconstitutional practices and injustices perpetuated under this law have benefited men in the community. They do not want to give these up. They use the platform of identity politics to say that making changes to Muslim personal law is an erosion of rights afforded to ALL Muslims. They want to keep the arbitrary and unsupervised power of the MMDA untouched by declaring it ‘divine’. These constituencies that are male-led and often anti-women keep the Muslim political elites afloat. As such, historically, we have seen Muslim political leaders resisting reform of Muslim personal law.
Political elites, with privilege and education, sometimes know better but will not provide strong leadership for betterment of their communities. Controlling the discourse of ‘Muslim family’ is their ticket to power. Thus, they continue to employ this discourse at the cost of the rights of women and children of Muslim society. Repeatedly, during election time when the major parties are courting the Muslim vote is when these ‘community’ and political figures amplify their demands.
This is why Muslim women activists face vicious attacks when they try to shed light on the ugliness they encounter within their families and communities, because it threatens power structures. Most recently, we have seen activists labelled as ‘working against Islam’, ‘masterminds’ conjuring sentiments of criminality, ‘the threat from within’, a comment about gathering 6,000 women to demand for the need for reforms was recast as a threat to the state. Sharing photographs and using this language targets individuals and gives permission for ‘righteous’ violence. Muslim politicians have been silent for too long. They must care more about their power and voter bases than the welfare of the communities they represent.
Simultaneously, consecutive Sri Lankan governments protect power-holds by deploying a language of non-interference. A language of ‘leave it to the community’, ‘my hands are tied’, ‘your people don’t want change’, ‘it’s too sensitive’. All of these statements are but masks for racism and misogyny. This dynamic has permeated everywhere – into professional, academic and civil society spaces. Muslim women are doubly marginalised by this language, as it shuts the door on the faces of Muslim women raising grievances.
Consecutive Sri Lankan governments have engaged in destructive majoritarian politics of outright racism, fear mongering and terrorising of minority peoples. Doing away with personal laws is a constant and easy threat deployed by majoritarian agendas. Community gatekeepers also use this threat to keep their people, particularly Muslim women, from asking for change. It is this politics of fear that contributes to silencing of and sometimes retaliation against ordinary Muslims for talking about their grievances openly.
More generally, Muslim reformists must contend with the fact that since independence, successive Sri Lankan governments have failed to maintain a strong commitment to pluralistic policies and have engaged in non-participatory and opaque law-making processes. Similarly, all political parties are guilty of a scant commitment to securing substantive, structural change for women including that of political representation for ALL women. Any advancements in the law have been elite-led often seems to happen only when the stars align! This deeply divisive, patronage-based, discriminatory and opportunistic political culture creates an almost impermeable barrier to any advancement of Muslim women’s rights and for that matter of advancement of the rights of any marginalised group in the country.
Wedged between this politics of hate and fear being played by the majoritarian state and the self-proclaimed representatives of the Muslim community, ordinary Muslim families are struggling to cope with the economic crisis, like all other ordinary families in Sri Lanka. They face increasing daily concerns about money, food, livelihoods and overall economic security for themselves and their children. The emotional labour of worrying about it all alone is crippling. Meanwhile, the State continues to crush avenues to complain and protest for justice. People are also dealing with the electoral shenanigans that prey on vulnerabilities and the making afresh the same old promises.
Token bills promising women’s equality are charging ahead of law reforms that have been struggling for state recognition for decades, including the MMDA. It is amid the growing complexities of daily struggles that Muslim women activists continue to nurture the call for MMDA reforms. It is precisely because of these complexities and the odds stacked against Muslim women that all citizens who want change and believe in equality and justice ought to support Muslim women in their call for progressive reforms. It is only by coming together as citizens of this country that we can ensure the inalienable fundamental rights of Muslim women and children without being appropriated either by majoritarian state agenda or by conservative Muslim community agenda.
Everyone should support MMDA reforms
To support these reforms is to protect little children from being ‘given away’ in marriage and accords equally able adult women the same right to be proactive and full members of society in their public and private lives as the men in their community. If, as peoples of this country, we cannot find it in ourselves to make the time, effort and commit to this, we not only fail Muslim women and children but we fail to understand what system change really means. Nation-wide support for Muslim women activists, for their just demands, at this time will pierce through a politics of elite power that we as Sri Lankans are trying to reject. Even at the on-coming local government elections choose candidates that care about marginalised communities. Perhaps one day, together, we can change this feeling that all of us have about many issues, that “No one listens, they do not care”.
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The U.S. Navy’s Diving and Salvage Center can be found in a location as obscure as its name—down what was once a country lane in rural Panama City, a now-booming resort city in the southwestern panhandle of Florida, 70 miles south of the Alabama border. The center’s complex is as nondescript as its location—a drab concrete post-World War II structure that has the look of a vocational high school on the west side of Chicago. A coin-operated laundromat and a dance school are across what is now a four-lane road.
The center has been training highly skilled deep-water divers for decades who, once assigned to American military units worldwide, are capable of technical diving to do the good—using C4 explosives to clear harbors and beaches of debris and unexploded ordinance—as well as the bad, like blowing up foreign oil rigs, fouling intake valves for undersea power plants, destroying locks on crucial shipping canals. The Panama City center, which boasts the second largest indoor pool in America, was the perfect place to recruit the best, and most taciturn, graduates of the diving school who successfully did last summer what they had been authorized to do 260 feet under the surface of the Baltic Sea.
Last June, the Navy divers, operating under the cover of a widely publicized mid-summer NATO exercise known as BALTOPS 22, planted the remotely triggered explosives that, three months later, destroyed three of the four Nord Stream pipelines, according to a source with direct knowledge of the operational planning.
Two of the pipelines, which were known collectively as Nord Stream 1, had been providing Germany and much of Western Europe with cheap Russian natural gas for more than a decade. A second pair of pipelines, called Nord Stream 2, had been built but were not yet operational. Now, with Russian troops massing on the Ukrainian border and the bloodiest war in Europe since 1945 looming, President Joseph Biden saw the pipelines as a vehicle for Vladimir Putin to weaponize natural gas for his political and territorial ambitions.
Asked for comment, Adrienne Watson, a White House spokesperson, said in an email, “This is false and complete fiction.” Tammy Thorp, a spokesperson for the Central Intelligence Agency, similarly wrote: “This claim is completely and utterly false.”
Biden’s decision to sabotage the pipelines came after more than nine months of highly secret back and forth debate inside Washington’s national security community about how to best achieve that goal. For much of that time, the issue was not whether to do the mission, but how to get it done with no overt clue as to who was responsible.
There was a vital bureaucratic reason for relying on the graduates of the center’s hardcore diving school in Panama City. The divers were Navy only, and not members of America’s Special Operations Command, whose covert operations must be reported to Congress and briefed in advance to the Senate and House leadership—the so-called Gang of Eight. The Biden Administration was doing everything possible to avoid leaks as the planning took place late in 2021 and into the first months of 2022.
President Biden and his foreign policy team—National Security Adviser Jake Sullivan, Secretary of State Tony Blinken, and Victoria Nuland, the Undersecretary of State for Policy—had been vocal and consistent in their hostility to the two pipelines, which ran side by side for 750 miles under the Baltic Sea from two different ports in northeastern Russia near the Estonian border, passing close to the Danish island of Bornholm before ending in northern Germany.
The direct route, which bypassed any need to transit Ukraine, had been a boon for the German economy, which enjoyed an abundance of cheap Russian natural gas—enough to run its factories and heat its homes while enabling German distributors to sell excess gas, at a profit, throughout Western Europe. Action that could be traced to the administration would violate US promises to minimize direct conflict with Russia. Secrecy was essential.
From its earliest days, Nord Stream 1 was seen by Washington and its anti-Russian NATO partners as a threat to western dominance. The holding company behind it, Nord Stream AG, was incorporated in Switzerland in 2005 in partnership with Gazprom, a publicly traded Russian company producing enormous profits for shareholders which is dominated by oligarchs known to be in the thrall of Putin. Gazprom controlled 51 percent of the company, with four European energy firms—one in France, one in the Netherlands and two in Germany—sharing the remaining 49 percent of stock, and having the right to control downstream sales of the inexpensive natural gas to local distributors in Germany and Western Europe. Gazprom’s profits were shared with the Russian government, and state gas and oil revenues were estimated in some years to amount to as much as 45 percent of Russia’s annual budget.
America’s political fears were real: Putin would now have an additional and much-needed major source of income, and Germany and the rest of Western Europe would become addicted to low-cost natural gas supplied by Russia—while diminishing European reliance on America. In fact, that’s exactly what happened. Many Germans saw Nord Stream 1 as part of the deliverance of former Chancellor Willy Brandt’s famed Ostpolitik theory, which would enable postwar Germany to rehabilitate itself and other European nations destroyed in World War II by, among other initiatives, utilizing cheap Russian gas to fuel a prosperous Western European market and trading economy.
Nord Stream 1 was dangerous enough, in the view of NATO and Washington, but Nord Stream 2, whose construction was completed in September of 2021, would, if approved by German regulators, double the amount of cheap gas that would be available to Germany and Western Europe. The second pipeline also would provide enough gas for more than 50 percent of Germany’s annual consumption. Tensions were constantly escalating between Russia and NATO, backed by the aggressive foreign policy of the Biden Administration.
Opposition to Nord Stream 2 flared on the eve of the Biden inauguration in January 2021, when Senate Republicans, led by Ted Cruz of Texas, repeatedly raised the political threat of cheap Russian natural gas during the confirmation hearing of Blinken as Secretary of State. By then a unified Senate had successfully passed a law that, as Cruz told Blinken, “halted [the pipeline] in its tracks.” There would be enormous political and economic pressure from the German government, then headed by Angela Merkel, to get the second pipeline online.
Would Biden stand up to the Germans? Blinken said yes, but added that he had not discussed the specifics of the incoming President’s views. “I know his strong conviction that this is a bad idea, the Nord Stream 2,” he said. “I know that he would have us use every persuasive tool that we have to convince our friends and partners, including Germany, not to move forward with it.”
A few months later, as the construction of the second pipeline neared completion, Biden blinked. That May, in a stunning turnaround, the administration waived sanctions against Nord Stream AG, with a State Department official conceding that trying to stop the pipeline through sanctions and diplomacy had “always been a long shot.” Behind the scenes, administration officials reportedly urged Ukrainian President Volodymyr Zelensky, by then facing a threat of Russian invasion, not to criticize the move.
There were immediate consequences. Senate Republicans, led by Cruz, announced an immediate blockade of all of Biden’s foreign policy nominees and delayed passage of the annual defense bill for months, deep into the fall. Politico later depicted Biden’s turnabout on the second Russian pipeline as “the one decision, arguably more than the chaotic military withdrawal from Afghanistan, that has imperiled Biden’s agenda.”
The administration was floundering, despite getting a reprieve on the crisis in mid-November, when Germany’s energy regulators suspended approval of the second Nord Stream pipeline. Natural gas prices surged 8% within days, amid growing fears in Germany and Europe that the pipeline suspension and the growing possibility of a war between Russia and Ukraine would lead to a very much unwanted cold winter. It was not clear to Washington just where Olaf Scholz, Germany’s newly appointed chancellor, stood. Months earlier, after the fall of Afghanistan, Scholtz had publicly endorsed French President Emmanuel Macron’s call for a more autonomous European foreign policy in a speech in Prague—clearly suggesting less reliance on Washington and its mercurial actions.
Throughout all of this, Russian troops had been steadily and ominously building up on the borders of Ukraine, and by the end of December more than 100,000 soldiers were in position to strike from Belarus and Crimea. Alarm was growing in Washington, including an assessment from Blinken that those troop numbers could be “doubled in short order.”
The administration’s attention once again was focused on Nord Stream. As long as Europe remained dependent on the pipelines for cheap natural gas, Washington was afraid that countries like Germany would be reluctant to supply Ukraine with the money and weapons it needed to defeat Russia.
It was at this unsettled moment that Biden authorized Jake Sullivan to bring together an interagency group to come up with a plan.
All options were to be on the table. But only one would emerge.
PLANNING
In December of 2021, two months before the first Russian tanks rolled into Ukraine, Jake Sullivan convened a meeting of a newly formed task force—men and women from the Joint Chiefs of Staff, the CIA, and the State and Treasury Departments—and asked for recommendations about how to respond to Putin’s impending invasion.
It would be the first of a series of top-secret meetings, in a secure room on a top floor of the Old Executive Office Building, adjacent to the White House, that was also the home of the President’s Foreign Intelligence Advisory Board (PFIAB). There was the usual back and forth chatter that eventually led to a crucial preliminary question: Would the recommendation forwarded by the group to the President be reversible—such as another layer of sanctions and currency restrictions—or irreversible—that is, kinetic actions, which could not be undone?
What became clear to participants, according to the source with direct knowledge of the process, is that Sullivan intended for the group to come up with a plan for the destruction of the two Nord Stream pipelines—and that he was delivering on the desires of the President.
Over the next several meetings, the participants debated options for an attack. The Navy proposed using a newly commissioned submarine to assault the pipeline directly. The Air Force discussed dropping bombs with delayed fuses that could be set off remotely. The CIA argued that whatever was done, it would have to be covert. Everyone involved understood the stakes. “This is not kiddie stuff,” the source said. If the attack were traceable to the United States, “It’s an act of war.”
At the time, the CIA was directed by William Burns, a mild-mannered former ambassador to Russia who had served as deputy secretary of state in the Obama Administration. Burns quickly authorized an Agency working group whose ad hoc members included—by chance—someone who was familiar with the capabilities of the Navy’s deep-sea divers in Panama City. Over the next few weeks, members of the CIA’s working group began to craft a plan for a covert operation that would use deep-sea divers to trigger an explosion along the pipeline.
Something like this had been done before. In 1971, the American intelligence community learned from still undisclosed sources that two important units of the Russian Navy were communicating via an undersea cable buried in the Sea of Okhotsk, on Russia’s Far East Coast. The cable linked a regional Navy command to the mainland headquarters at Vladivostok.
A hand-picked team of Central Intelligence Agency and National Security Agency operatives was assembled somewhere in the Washington area, under deep cover, and worked out a plan, using Navy divers, modified submarines and a deep-submarine rescue vehicle, that succeeded, after much trial and error, in locating the Russian cable. The divers planted a sophisticated listening device on the cable that successfully intercepted the Russian traffic and recorded it on a taping system.
The NSA learned that senior Russian navy officers, convinced of the security of their communication link, chatted away with their peers without encryption. The recording device and its tape had to be replaced monthly and the project rolled on merrily for a decade until it was compromised by a forty-four-year-old civilian NSA technician named Ronald Pelton who was fluent in Russian. Pelton was betrayed by a Russian defector in 1985 and sentenced to prison. He was paid just $5,000 by the Russians for his revelations about the operation, along with $35,000 for other Russian operational data he provided that was never made public.
That underwater success, codenamed Ivy Bells, was innovative and risky, and produced invaluable intelligence about the Russian Navy’s intentions and planning.
Still, the interagency group was initially skeptical of the CIA’s enthusiasm for a covert deep-sea attack. There were too many unanswered questions. The waters of the Baltic Sea were heavily patrolled by the Russian navy, and there were no oil rigs that could be used as cover for a diving operation. Would the divers have to go to Estonia, right across the border from Russia’s natural gas loading docks, to train for the mission? “It would be a goat fuck,” the Agency was told.
Throughout “all of this scheming,” the source said, “some working guys in the CIA and the State Department were saying, ‘Don’t do this. It’s stupid and will be a political nightmare if it comes out.’”
Nevertheless, in early 2022, the CIA working group reported back to Sullivan’s interagency group: “We have a way to blow up the pipelines.”
What came next was stunning. On February 7, less than three weeks before the seemingly inevitable Russian invasion of Ukraine, Biden met in his White House office with German Chancellor Olaf Scholz, who, after some wobbling, was now firmly on the American team. At the press briefing that followed, Biden defiantly said, “If Russia invades . . . there will be no longer a Nord Stream 2. We will bring an end to it.”
Twenty days earlier, Undersecretary Nuland had delivered essentially the same message at a State Department briefing, with little press coverage. “I want to be very clear to you today,” she said in response to a question. “If Russia invades Ukraine, one way or another Nord Stream 2 will not move forward.”
Several of those involved in planning the pipeline mission were dismayed by what they viewed as indirect references to the attack.
“It was like putting an atomic bomb on the ground in Tokyo and telling the Japanese that we are going to detonate it,” the source said. “The plan was for the options to be executed post invasion and not advertised publicly. Biden simply didn’t get it or ignored it.”
Biden’s and Nuland’s indiscretion, if that is what it was, might have frustrated some of the planners. But it also created an opportunity. According to the source, some of the senior officials of the CIA determined that blowing up the pipeline “no longer could be considered a covert option because the President just announced that we knew how to do it.”
The plan to blow up Nord Stream 1 and 2 was suddenly downgraded from a covert operation requiring that Congress be informed to one that was deemed as a highly classified intelligence operation with U.S. military support. Under the law, the source explained, “There was no longer a legal requirement to report the operation to Congress. All they had to do now is just do it—but it still had to be secret. The Russians have superlative surveillance of the Baltic Sea.”
The Agency working group members had no direct contact with the White House, and were eager to find out if the President meant what he’d said—that is, if the mission was now a go. The source recalled, “Bill Burns comes back and says, ‘Do it.’”
THE OPERATION
Norway was the perfect place to base the mission.
In the past few years of East-West crisis, the U.S. military has vastly expanded its presence inside Norway, whose western border runs 1,400 miles along the north Atlantic Ocean and merges above the Arctic Circle with Russia. The Pentagon has created high paying jobs and contracts, amid some local controversy, by investing hundreds of millions of dollars to upgrade and expand American Navy and Air Force facilities in Norway. The new works included, most importantly, an advanced synthetic aperture radar far up north that was capable of penetrating deep into Russia and came online just as the American intelligence community lost access to a series of long-range listening sites inside China.
A newly refurbished American submarine base, which had been under construction for years, had become operational and more American submarines were now able to work closely with their Norwegian colleagues to monitor and spy on a major Russian nuclear redoubt 250 miles to the east, on the Kola Peninsula. America also has vastly expanded a Norwegian air base in the north and delivered to the Norwegian air force a fleet of Boeing-built P8 Poseidon patrol planes to bolster its long-range spying on all things Russia.
In return, the Norwegian government angered liberals and some moderates in its parliament last November by passing the Supplementary Defense Cooperation Agreement (SDCA). Under the new deal, the U.S. legal system would have jurisdiction in certain “agreed areas” in the North over American soldiers accused of crimes off base, as well as over those Norwegian citizens accused or suspected of interfering with the work at the base.
Norway was one of the original signatories of the NATO Treaty in 1949, in the early days of the Cold War. Today, the supreme commander of NATO is Jens Stoltenberg, a committed anti-communist, who served as Norway’s prime minister for eight years before moving to his high NATO post, with American backing, in 2014. He was a hardliner on all things Putin and Russia who had cooperated with the American intelligence community since the Vietnam War. He has been trusted completely since. “He is the glove that fits the American hand,” the source said.
Back in Washington, planners knew they had to go to Norway. “They hated the Russians, and the Norwegian navy was full of superb sailors and divers who had generations of experience in highly profitable deep-sea oil and gas exploration,” the source said. They also could be trusted to keep the mission secret. (The Norwegians may have had other interests as well. The destruction of Nord Stream—if the Americans could pull it off—would allow Norway to sell vastly more of its own natural gas to Europe.)
Sometime in March, a few members of the team flew to Norway to meet with the Norwegian Secret Service and Navy. One of the key questions was where exactly in the Baltic Sea was the best place to plant the explosives. Nord Stream 1 and 2, each with two sets of pipelines, were separated much of the way by little more than a mile as they made their run to the port of Greifswald in the far northeast of Germany.
The Norwegian navy was quick to find the right spot, in the shallow waters of the Baltic sea a few miles off Denmark’s Bornholm Island. The pipelines ran more than a mile apart along a seafloor that was only 260 feet deep. That would be well within the range of the divers, who, operating from a Norwegian Alta class mine hunter, would dive with a mixture of oxygen, nitrogen and helium streaming from their tanks, and plant shaped C4 charges on the four pipelines with concrete protective covers. It would be tedious, time consuming and dangerous work, but the waters off Bornholm had another advantage: there were no major tidal currents, which would have made the task of diving much more difficult.
After a bit of research, the Americans were all in.
At this point, the Navy’s obscure deep-diving group in Panama City once again came into play. The deep-sea schools at Panama City, whose trainees participated in Ivy Bells, are seen as an unwanted backwater by the elite graduates of the Naval Academy in Annapolis, who typically seek the glory of being assigned as a Seal, fighter pilot, or submariner. If one must become a “Black Shoe”—that is, a member of the less desirable surface ship command—there is always at least duty on a destroyer, cruiser or amphibious ship. The least glamorous of all is mine warfare. Its divers never appear in Hollywood movies, or on the cover of popular magazines.
“The best divers with deep diving qualifications are a tight community, and only the very best are recruited for the operation and told to be prepared to be summoned to the CIA in Washington,” the source said.
The Norwegians and Americans had a location and the operatives, but there was another concern: any unusual underwater activity in the waters off Bornholm might draw the attention of the Swedish or Danish navies, which could report it.
Denmark had also been one of the original NATO signatories and was known in the intelligence community for its special ties to the United Kingdom. Sweden had applied for membership into NATO, and had demonstrated its great skill in managing its underwater sound and magnetic sensor systems that successfully tracked Russian submarines that would occasionally show up in remote waters of the Swedish archipelago and be forced to the surface.
The Norwegians joined the Americans in insisting that some senior officials in Denmark and Sweden had to be briefed in general terms about possible diving activity in the area. In that way, someone higher up could intervene and keep a report out of the chain of command, thus insulating the pipeline operation. “What they were told and what they knew were purposely different,” the source told me. (The Norwegian embassy, asked to comment on this story, did not respond.)
The Norwegians were key to solving other hurdles. The Russian navy was known to possess surveillance technology capable of spotting, and triggering, underwater mines. The American explosive devices needed to be camouflaged in a way that would make them appear to the Russian system as part of the natural background—something that required adapting to the specific salinity of the water. The Norwegians had a fix.
The Norwegians also had a solution to the crucial question of when the operation should take place. Every June, for the past 21 years, the American Sixth Fleet, whose flagship is based in Gaeta, Italy, south of Rome, has sponsored a major NATO exercise in the Baltic Sea involving scores of allied ships throughout the region. The current exercise, held in June, would be known as Baltic Operations 22, or BALTOPS 22. The Norwegians proposed this would be the ideal cover to plant the mines.
The Americans provided one vital element: they convinced the Sixth Fleet planners to add a research and development exercise to the program. The exercise, as made public by the Navy, involved the Sixth Fleet in collaboration with the Navy’s “research and warfare centers.” The at-sea event would be held off the coast of Bornholm Island and involve NATO teams of divers planting mines, with competing teams using the latest underwater technology to find and destroy them.
It was both a useful exercise and ingenious cover. The Panama City boys would do their thing and the C4 explosives would be in place by the end of BALTOPS22, with a 48-hour timer attached. All of the Americans and Norwegians would be long gone by the first explosion.
The days were counting down. “The clock was ticking, and we were nearing mission accomplished,” the source said.
And then: Washington had second thoughts. The bombs would still be planted during BALTOPS, but the White House worried that a two-day window for their detonation would be too close to the end of the exercise, and it would be obvious that America had been involved.
Instead, the White House had a new request: “Can the guys in the field come up with some way to blow the pipelines later on command?”
Some members of the planning team were angered and frustrated by the President’s seeming indecision. The Panama City divers had repeatedly practiced planting the C4 on pipelines, as they would during BALTOPS, but now the team in Norway had to come up with a way to give Biden what he wanted—the ability to issue a successful execution order at a time of his choosing.
Being tasked with an arbitrary, last-minute change was something the CIA was accustomed to managing. But it also renewed the concerns some shared over the necessity, and legality, of the entire operation.
The President’s secret orders also evoked the CIA’s dilemma in the Vietnam War days, when President Johnson, confronted by growing anti-Vietnam War sentiment, ordered the Agency to violate its charter—which specifically barred it from operating inside America—by spying on antiwar leaders to determine whether they were being controlled by Communist Russia.
The agency ultimately acquiesced, and throughout the 1970s it became clear just how far it had been willing to go. There were subsequent newspaper revelations in the aftermath of the Watergate scandals about the Agency’s spying on American citizens, its involvement in the assassination of foreign leaders and its undermining of the socialist government of Salvador Allende.
Those revelations led to a dramatic series of hearings in the mid-1970s in the Senate, led by Frank Church of Idaho, that made it clear that Richard Helms, the Agency director at the time, accepted that he had an obligation to do what the President wanted, even if it meant violating the law.
In unpublished, closed-door testimony, Helms ruefully explained that “you almost have an Immaculate Conception when you do something” under secret orders from a President. “Whether it’s right that you should have it, or wrong that you shall have it, [the CIA] works under different rules and ground rules than any other part of the government.” He was essentially telling the Senators that he, as head of the CIA, understood that he had been working for the Crown, and not the Constitution.
The Americans at work in Norway operated under the same dynamic, and dutifully began working on the new problem—how to remotely detonate the C4 explosives on Biden’s order. It was a much more demanding assignment than those in Washington understood. There was no way for the team in Norway to know when the President might push the button. Would it be in a few weeks, in many months or in half a year or longer?
The C4 attached to the pipelines would be triggered by a sonar buoy dropped by a plane on short notice, but the procedure involved the most advanced signal processing technology. Once in place, the delayed timing devices attached to any of the four pipelines could be accidentally triggered by the complex mix of ocean background noises throughout the heavily trafficked Baltic Sea—from near and distant ships, underwater drilling, seismic events, waves and even sea creatures. To avoid this, the sonar buoy, once in place, would emit a sequence of unique low frequency tonal sounds—much like those emitted by a flute or a piano—that would be recognized by the timing device and, after a pre-set hours of delay, trigger the explosives. (“You want a signal that is robust enough so that no other signal could accidentally send a pulse that detonated the explosives,” I was told by Dr. Theodore Postol, professor emeritus of science, technology and national security policy at MIT. Postol, who has served as the science adviser to the Pentagon’s Chief of Naval Operations, said the issue facing the group in Norway because of Biden’s delay was one of chance: “The longer the explosives are in the water the greater risk there would be of a random signal that would launch the bombs.”)
On September 26, 2022, a Norwegian Navy P8 surveillance plane made a seemingly routine flight and dropped a sonar buoy. The signal spread underwater, initially to Nord Stream 2 and then on to Nord Stream 1. A few hours later, the high-powered C4 explosives were triggered and three of the four pipelines were put out of commission. Within a few minutes, pools of methane gas that remained in the shuttered pipelines could be seen spreading on the water’s surface and the world learned that something irreversible had taken place.
FALLOUT
In the immediate aftermath of the pipeline bombing, the American media treated it like an unsolved mystery. Russia was repeatedly cited as a likely culprit, spurred on by calculated leaks from the White House—but without ever establishing a clear motive for such an act of self-sabotage, beyond simple retribution. A few months later, when it emerged that Russian authorities had been quietly getting estimates for the cost to repair the pipelines, the New York Times described the news as “complicating theories about who was behind” the attack. No major American newspaper dug into the earlier threats to the pipelines made by Biden and Undersecretary of State Nuland.
While it was never clear why Russia would seek to destroy its own lucrative pipeline, a more telling rationale for the President’s action came from Secretary of State Blinken.
Asked at a press conference last September about the consequences of the worsening energy crisis in Western Europe, Blinken described the moment as a potentially good one:
“It’s a tremendous opportunity to once and for all remove the dependence on Russian energy and thus to take away from Vladimir Putin the weaponization of energy as a means of advancing his imperial designs. That’s very significant and that offers tremendous strategic opportunity for the years to come, but meanwhile we’re determined to do everything we possibly can to make sure the consequences of all of this are not borne by citizens in our countries or, for that matter, around the world.”
More recently, Victoria Nuland expressed satisfaction at the demise of the newest of the pipelines. Testifying at a Senate Foreign Relations Committee hearing in late January she told Senator Ted Cruz, “Like you, I am, and I think the Administration is, very gratified to know that Nord Stream 2 is now, as you like to say, a hunk of metal at the bottom of the sea.”
The source had a much more streetwise view of Biden’s decision to sabotage more than 1500 miles of Gazprom pipeline as winter approached. “Well,” he said, speaking of the President, “I gotta admit the guy has a pair of balls. He said he was going to do it, and he did.”
Asked why he thought the Russians failed to respond, he said cynically, “Maybe they want the capability to do the same things the U.S. did.
“It was a beautiful cover story,” he went on. “Behind it was a covert operation that placed experts in the field and equipment that operated on a covert signal.
“The only flaw was the decision to do it.”
Click here to read the original version of this article published in the author’s personal blog
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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
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Hitting back at the Adani Group’s assertion that the Hindenburg report on the group is an “attack on India”, the US-based research firm has said that “India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.”
The Adani Group is trying to lead the focus away from substantive issues and “instead stoked a nationalist narrative, claiming our report amounted to a calculated attack on India,” the firm said.
“We believe that fraud is a fraud, even when it’s perpetrated by one of the wealthiest individuals in the world,” the US firm said in a scathing attack on the Adani Group. “To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future,” it added.
On January 24, Hindenburg Research came out with a 106-page report, which accused the Adani group of “brazen stock manipulation and accounting fraud”.
“In terms of substance, Adani’s response only included about 30 pages focused on issues related to our report,” Hindenburg said on Adani’s response.
The US firm said the remainder of the response consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables.
“Our report asked 88 specific questions of the Adani Group. In its response, Adani failed to specifically answer 62 of them. Instead, it mainly grouped questions together in categories and provided generalised deflections,” the research house said.
“In other instances, Adani simply pointed to its own filings and declared the questions or relevant matters settled, again failing to substantively address the issues raised,” Hindenburg said, adding that the Adani response “opened with the sensationalistic claim that we are the Madoffs of Manhattan”.
“Adani also claimed we have committed a ‘flagrant breach of applicable securities and foreign exchange laws’. Despite Adani’s failure to identify any such laws, this is another serious accusation that we categorically deny,” it said.
“In short, the Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself,” the US firm said. “Of the few questions it did answer, its responses largely confirmed our findings, as we detail.”
“But before we get into those, we note that the core allegations of our report – focused on numerous suspect transactions with offshore entities – were left completely unaddressed,” it said.
News agencies
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Richest Indian Gautam Adani’s group on Sunday likened the damning allegations made by short seller Hindenburg Research to a “calculated attack” on India, its institutions and growth story, saying the allegations are “nothing but a lie”.
In a 413-page response, Adani Group said the report was driven by “an ulterior motive” to “create a false market” to allow the US firm to make financial gains.
“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” it said.
Stating that the allegations in Hindenburg Research’s January 24 report are “nothing but a lie”, it said the document is “a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive”.
“This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors,” it said.
It went on to question the credibility and ethics of Hindenburg, and said the mala fide intention underlying the report were apparent given its timing when Adani Enterprises Limited is undertaking one of the largest ever further public offering of equity shares in India.
“Hindenburg has not published this report for any altruistic reasons but purely out of selfish motives and in flagrant breach of applicable securities and foreign exchange laws,” it said. “The report is neither ‘independent’ nor ‘objective’ nor ‘well researched’.”
Activist short seller Hindenburg Research, the firm which caught global attention with takedowns of electric-vehicle makers Nikola and Lordstown Motors, alleged in a report on Wednesday that its two-year investigation found the Adani Group “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades”.
The report by the tiny New York firm that specialises in short selling has led to Adani group losing more than USD 50 billion in market value in just two trading sessions and Adani himself losing in excess of USD 20 billion, or about one-fifth of his total fortune.
Hindenburg called out the conglomerate’s “substantial debt”, which includes pledging shares for loans; that Adani’s brother Vinod “manages a vast labyrinth of offshore shell entities” that move billions into group companies without required disclosure; and that its auditor “hardly seems capable of complex audit work”.
Of the 88 questions raised by Hindenburg, 65 of them relate to matters that have been duly disclosed by Adani portfolio companies, Adani Group said. “Of the balance 23 questions, 18 relate to public shareholders and third parties (and not the Adani portfolio companies), while the balance 5 are baseless allegations based on imaginary fact patterns.”
It listed questions from the report and dismissed them as “false suggestions based on malicious misrepresentation of governance practices” or “manipulated narrative around unrelated third party entities” or “biased and unsubstantiated rhetoric”.
“We reaffirm that we are in compliance with all applicable laws and regulations. We are committed to the highest levels of governance to protect the interests of all our stakeholders,” it said. “The Adani Portfolio also has very strong internal controls and audit controls. All the listed companies of Adani Portfolio have a robust governance framework.”
The focus of the Adani portfolio and the Adani verticals is to contribute to nation building and take India to the world, it said.
“We will exercise our rights to pursue remedies to safeguard our stakeholders before all appropriate authorities and we reserve our rights to respond further to any of the allegations or contents of the Hindenburg report or to supplement this statement,” it added.
Sources: PTI/ Agencies
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