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Budgets 2023: The Acid Test in Bankrupt Sri Lanka

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President and Finance Minister Ranil Wickremesinghe is to present his maiden full budget for 2023 in Parliament this afternoon. A lone MP in Parliament representing the United National Party, he accepted the premiership in May 2022 when the incumbent Prime Minister Mahinda Rajapaksa resigned from the post after a popular struggle against his administration. He informed the Parliament and the nation that he accepted the position, when the others were reluctant, to rescue the country’s dying economy tapping onto his experiences as premier on five previous occasions.

Then, after two months in early July when President Gotabaya Rajapaksa fled the country and tendered resignation from overseas, Ranil was sworn in as Acting President in terms of the provisions of the Constitutions. Soon after that, his position was ratified in Parliament with 134 votes in his favour. He very quickly took over the mantle of the Government, appointed a PM from the ruling Sri Lanka Podujana Party or SLPP, formed a skeletal Cabinet from leading figures in SLPP, and invited the Opposition to join hands with him to rescue the economy as a government of emergency. When the response to this last request was in the negative, he filled the vacancies in the Cabinet with other members of SLPP, introduced an interim budget for the last three months of 2022, got an amendment to the Constitution passed in Parliament, proposed a wide tax hike, and continued with the work already begun to seek a bailout package from IMF. 

There had been several preconditions imposed by IMF for such a bailout like increasing tax revenue, reforming state-owned enterprises, Central Bank refraining itself from funding the budget, tightening monetary policy, making the Central Bank independent, working towards the generation of a surplus of 2.3% in the primary account of the budget by 2025, and restructuring the unsustainable foreign debt. His Central Bank Governor and the Treasury Secretary had been working hard on meeting these goals and attained a certain level of progress except the foreign debt restructuring issue. Ranil very confidently told the Parliament last week that Sri Lanka could hope to finalise the IMF bailout by the end of 2022 with India and China participating actively in the debt restructuring program. 

This is the background to the presentation of the Budget for 2023. 

However, Sri Lanka’s economy is still not out of the woods as admitted by the Central Bank Governor recently. The major macroeconomic issues are looming over the country. On the foreign exchange side, the usable foreign reserves have now fallen to a virtually zero level. The country cannot move back to a safe import program of essential items and raw materials. The shock treatment introduced by way of banning a significant volume of imports is still continuing, killing the economy’s ability to make a quick turnaround. The official consumer price inflation is high at around 70% with the increase in food items going at above 85%. But when the overall inflation, with prices of investment goods and export goods inclusive, as measured by Stephen Hanke’s inflation dashboard, it is above 115% per annum. 

The high food inflation has threatened the food security of both low income and middle-income consumers. The food security is defined as the affordability and availability of a nutritionally balanced diet and the increases in prices have reduced the affordability side. Compounding the food insecurity issue, there is a shortage as well as cost increases of essential medicines crippling the country’s healthcare system. This is a major humanitarian crisis, and it should be resolved as quickly as possible to prevent street riots by angry crowds. The real economic growth is in the negative region with an estimated economic shrinkage of the GDP by about 9% in 2022 followed by a further shrinkage of 4.5% in 2023. 

The Central Bank expects a meagre economic recovery of about 1.5% in 2024 with a forecast of similar growth rates in the next 3-to-4-year time period. The Central Bank is working on an estimated nominal GDP of Rs. 24 trillion in 2022, up from Rs. 17 trillion in 2021. But when this is converted to dollar purchasing power by using the current exchange rate of Rs. 370 per dollar, its value falls to $ 65 billion in 2022 down from $ 85 billion in the previous year. What this means is that the economy will recede to the level which it had in 2011 with a per capita income of $ 3,000. 

To kickstart the economy growing from this depth and make Sri Lanka a developed country by 2048 as envisaged by Ranil is really a challenge. As a result, with slowing economic growth, Sri Lanka will have to remain a lower middle-income country for some time. In fact, the Cabinet of Ministers recently decided that even being a lower middle-income country is too much for Sri Lanka because it cannot have access to cheap funding from friendly countries and multilateral financial institutions like Asian Development Bank, International Development Association, and the UN System. It decided to request the World Bank to consider Sri Lanka as a low-income poor country for the purpose of securing such highly concessional and cheap loans. This does not mean that Sri Lanka will be downgraded to a low-income country in practice. If accepted, it will be regarded as low-income country for extending cheap loans. 

Apart from this, there are several other critical issues looming over the Budget 2023. The foreign debt restructuring program has hit a snarl at this late stage. What is being proposed to restructure is only the borrowing from commercial sources and from friendly countries by the central government which has been estimated to be at $ 33 billion by the Ministry of Finance. This is only a fraction of the total foreign debt of the country which stands at about $ 80 billion. 

Even if the commercial and friendly country loans are successfully restructured, Sri Lanka has a major foreign debt repayment issue due to the lack of foreign exchange to repay other types of foreign debt obtained from international lending institutions like ADB or World Bank, borrowing by state-owned enterprises like CPC, CEB, Water Board, and SriLankan Airlines, borrowing by the Central Bank and the financial institutions, and the borrowing by the private sector. 

In the next 12-month period, the debt repayment obligations of the country as estimated by the Central Bank will amount to $ 5 billion. When the Central Bank’s obligation to pay the outstanding amount due to Asian Clearing Union at $ 1.9 billion is also included, this goes up significantly to $ 6.9 billion. Sri Lanka does not have foreign exchange to meet these obligations.

Apart from this, China which holds about 52% of the total bilateral loans by the central government has become a holdout lender in the country’s debt restructuring exercise. Sri Lanka should meet in London, known as the London Club, to negotiate its commercial loans and in Paris, known as Paris Club, to do the same for bilateral loans. China is a member of neither club. And its policy has been not to follow the normal debt restructuring that involves foregoing a part of the principal or interest or both – known as offering a haircut – but giving a new loan to the borrower to repay the old debt and restart it as new one in the books of the borrower, known as refinancing. If Sri Lanka’s other creditors find that arrangement unacceptable, the negotiations will come to a halt and so would the IMF bailout and its associated other benefits. That was why IMF, World Bank and other creditors have repeatedly warned the Sri Lanka Government that it should immediately get China on board in the restructuring exercise. I have in this column mentioned earlier that it will be a test of Ranil’s diplomatic skills to get China on board as expected. 

Then, there are two other critical issues relating to debt and foreign exchange issues which will hamper his budget 2023. One is that the Treasury is not only empty but also overdrawn as far as the liquid funds are concerned. In terms of the Constitution, the Government operates through a cash flow account known as the Consolidated Fund. All the receipt of the Government through taxation, non-tax revenue, grants, and loan proceeds are credited to this account as resources. Then, expenses as approved by Parliament are debited to this account. Since these receipts and expenses are tallied in the budget, the Consolidated Fund should balance itself except for small surpluses or deficits that may occur due to the non-synchronisation of the flows. But over the time, they should be naturally eliminated. 

But what is being experienced by the Sri Lanka Government is that the deficit in the Fund is rising month after month forcing the Treasury to finance it through temporary overdraft facilities obtained from the two state banks and a provisional advance from the Central Bank equal to 10% of the estimated revenue for the year. As such, the deficit which had been around Rs. 100 billion a few years back has now ballooned to nearly Rs. 1 trillion. With the Government revenue falling short of the estimates and the expenditure overdoing, the overdrawn state of the Fund is rising. The biggest challenge of the Budget 2023 is to eliminate this overdrawn position and make a new start with regard to budgeting of the country. That requires Ranil to use the current revenue to reduce the two overdraft balances from the two state banks that amounted to Rs. 840 billion at end-2021. With the expected meagre income level in 2023, this is an impossible task. 

The other critical issue is the negative net foreign reserve position of the Central Bank. The Bank always had a net positive position with regard to its foreign reserves but from May 2021, they fell into the negative region first by small amounts but then in leaps and bounds in every passing month. Since action was not taken to correct it at that time, it began to grow from around a shortfall of about $ 25 million at the beginning to $ 4,500 million as at end of September 2022. Since the Bank has reported its gross foreign reserves at about $ 1,700 million, the total foreign exchange liabilities of the Bank can be estimated at $ 6,200 million. 

This does not mean that the Central Bank’s overall position depicts a state of bankruptcy since it has a positive balance of domestic assets, in the form of loans given to Government and to commercial banks. But regarding its foreign involvements, it is a state of bankruptcy. Unless the Budget 2023 takes action to correct it immediately, the problem will be compounded in the period to come with no available facilities for correction. The Central Bank of the Philippines underwent such a trouble in 1993 and eventually was liquidated paving the way for the establishment of a new central bank with support from IMF, Government of Japan, and the US Treasury. This state of affairs within the Central Bank will not be viewed kindly by outside creditors. 

Then, there is this domestic debt restructuring issue which is also peeping over the Budget of 2023. Previously, Sri Lanka’s domestic debt was not unsustainable and therefore, the issue did not arise. However, a debt unsustainability is a situation where a country can repay its debt and pay interest only by resorting to extraordinary measures and it is not left with an option except defaulting it. As long as the Government can borrow money from the market to service its domestic debt, its debt is sustainable. However, if it is unable to borrow from the market the entirety of its fund requirements and it must borrow from the Central Bank and the banking sector to finance it, its debt is unsustainable. 

The Central Bank’s new management is trying its best to avoid this possibility by increasing interest rates and eliminating the new lending to the Government. But with increases in interest rates from 12% to 30% plus, the current success rate is not encouraging. If the foreign creditors ask for a domestic debt restructuring as well, it will be a death blow to the country’s financial system. 

The Budget 2023 should address all these issues. With that only RW can show that his magic wand will be working. 

A version of this article originally published in Daily FT

Exclusive: The Booker laureate admits he keeps Rajpal’s manuscript

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Sri Lanka Guardian has sent a media query to Shehan Karunathilake but he is yet to respond. However, on behalf of the Sri Lankan origins booker prize winner, someone named “SK” has shared a message on social media stating that, “a claim has been made by a journalist in Colombo that the plot of my novel, ‘The Seven Moons of Maali Almeida’ was ‘stolen’ from a 56-page untitled ‘novella’ that he sent to me in 2011 seeking an author’s endorsement. His claim is both baseless and insulting.” This statement clearly accepted that the accused has received a manuscript from the author, Rajpal Abeynayake, and he has kept it for years.

“I have shared his email and the ‘novella’ manuscript with my lawyers who confirm that the claim of plagiarism is entirely unfounded and that the allegations made are libellous. I have also shared the ‘novella’ with my publishers – who confirm the texts bear no comparison whatsoever with my novel – there are no shared plots, characters nor text – and with the Booker Prize Foundation, so that they may be assured the claims are unfounded,” SK defended the case against Booker Prize Winner.

“We are glad to know that SK still keeps the original manuscript safe and he has given copies of the manuscript not only to his lawyers and publisher but also to Booker Prize Foundation,” said one of the senior lawyers in Colombo. Thus, Sri Lanka Guardian‘s inquiry to the Booker Prize Foundation a few days ago has yet to receive a response.  

“It is sad and disappointing that this statement has to be made. This should be a celebratory moment for Sri Lanka and its writers,” SK in his post attempted to earn sympathy.

Meanwhile, responding to the SK’s reaction, Rajpal Abeynayake says that personal insults unfounded in reality are ‘beneath this process’ and that he will not stoop so low as to respond to vicious and obnoxious third parties forwarding statements for some sort of vicarious titillation.

About the statement issued by SK so-called, presumably Shehan Karunatilaka, he says ‘let’s wait and see about the veracity of that, now that he has admitted receiving my manuscript’. Not only does he have my manuscript, but he also has it close at hand and handy to send to others too, says Rajpal.

Inside Story: Rogue Academics in Sri Lanka

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This investigative report is open for response as the accused have been named by the reporter-editors

As funny, stupid and pseudo-intellectual as it may sound, the above title of this article is not what I initially intended to give it. The originally intended title is along the lines of “A Case of Serial Plagiarism…” or something like When the Vice Chancellor is a Plagiarist – more on this in the later parts. Now welcome to some enlightenment.

Presented below is a summary of findings we had the misfortune to make after having a compelling urge to study the academic profile of this intellectual from South Eastern Sri Lanka: Professor Aboobacker Rameez. A. Rameez is currently the Vice Chancellor of South Eastern University of Sri Lanka since 2021 and a professor in sociology at this higher education institution since 2019. Some readers would also be familiar with the name from many op-ed articles he has authored for Colombo Telegraph, references to which can also be found at his Google Scholar profile page and Research Gate profile – maintained for a delicate balance between keeping it clean and being still stocked with stuff, reportedly due to Webometrics ranking requirements. Some of his newspaper-published scholarly works being listed in these research database profile pages were published by the online Tamil news website jaffnamuslim.com.      

While lacking the necessary tools and this being a pastime activity triggered initially by personal pursuits, and despite the attempts of the university administration headed by A. Rameez himself to repeatedly deny information on his publications he used for his promotion as a professor by merit in response to right-to-information requests, we were still able to find to our own shock and surprise the fact that serious acts of plagiarism and academic-mafia-like practices had been freely allowed in the most carefree ways.

Evidence in summary:

  • A. Rameez stole nearly 80% of the abstract of a published journal article covering actual research conducted in Nigeria and he published it as an abstract of his own work carried out in Sri Lanka
  • A. Rameez stole written content from another published, properly peer-reviewed Scopus-indexed journal article and composed about 3-pages long content, without a single modification, for his own article submitted to the journal run by his own faculty

A formal complaint regarding this matter has been made to the Council of South Eastern University of Sri Lanka via the Registrar of South Eastern University of Sri Lanka. All the council members of SEUSL have been presented with evidences of these offenses, which are termed Research Fraud in the language employed by UGC for describing offenses of this nature.

An extended summary of our findings is presented below for the amusement of the general public who are contributing financially and in various other ways directly or indirectly for the proliferation of activities of the sort that is being reported here.

  1. A. Rameez plagiarized nearly 80% of the abstract of O. Odaman et al. (2014)

A. Rameez, being the primary and corresponding author has published an abstract in the South Eastern University Arts Research Session 2015. The title of the Abstract is “Ageing and Health Seeking Behaviour: A Medical Sociological Approach to Nintavur Divisional Secretariat, Sri Lanka”. The following table shows a side-by side comparison of passages extracted from the abstract submitted by A. Rameez for publication against the abstract of a research article that had already been published.

Rameez et al. (2015)Odaman et al. (2014)
It focused on the most common health related problems of elderly: revealed where the elderly goes to seek medical care when sick, and those financially responsible for his/her medical needs.It focused on the most common health related problems of the elderly; revealed where the elderly goes to seek medical care when sick; and those financially responsible for his/her medical needs.
The findings show that, the majority of the elderly persons had age associated physical illnesses such as blood pressure, cardiac problems, diabetes, joint pains, kidney infections, cancer and tuberculosis that take a long time to heal.Majority of the elderly persons (62.7%) had age associated illnesses such as blood pressure, cardiac problems, diabetes, joint pains, kidney infections, cancer and tuberculosis that take a long time to heal.
More elderly males than female counterparts were found to have patronized traditional healers, resorted to self medication using local herbs or visit chemists’ shops whenever they were sick.More elderly males than their female counterparts were found to have patronized traditional healers, resorted to self medication using local herbs or visited chemists’ shops whenever they were sick.
This research suggested that, the government should puts in place programmes that would ensure good health behaviour and elderly people should be provided free, accessible and comprehensive health care in hospitals and other health care centres.It is recommended that elderly people should be provided free, accessible and comprehensive health care in hospitals and health centers because they would utilize the health services when available, accessible and affordable.

Notice that the work allowed to be published by the editorial committee of the Book of Abstracts of South Eastern University Arts Research Session (2015) makes the suggestion, as an outcome of the supposed research findings, that the elderly people should be provided free healthcare in Sri Lanka! We believe that it’s needless to say that unlike in the case of Nigeria, the Governments of Sri Lanka have been providing free healthcare for all of its citizens in all of Sri Lanka not only at the time this abstract was being presented and was being issued in print, possibly out of public funds, but since long before that until now and far into the future for sure.

If word counts are to be used as a crude estimate to indicate the severity of the rogue academic conduct with such a shallow level of sophistication in carefree plagiarism, we observe that of the 185 words that have been originally used for composing the abstract of Odaman et al., the abstract of Rameez et al. employs more than 80 percent of the words (149 out of 185) to compose itself.

The abstract published by Rameez et al. can be found in the Book of Abstracts published by SEUSL on 22nd December 2015.

This abstract can also be found at http://ir.lib.seu.ac.lk/handle/123456789/1532

The figure below portrays A. Rameez in the act, with hijacked text highlighted in yellow:

The work published by Odaman et al. can be found here. The article has been published in Vol. 7, No. 1 (2014), pp. 201-210 of International Review of Social Sciences and Humanities (ISSN 2248-9010 (Online), ISSN 2250-0715 (Print)).

The figure below shows how A. Rameez et al. did a stealth-mode robbery of the intellectual effort of Odaman et al., with the stolen text highlighted in yellow:

Anyone serious enough to access and look at the actual content of Odaman et al. would appreciate the true effort the original authors have put into their work despite what the title and abstract look like. And those familiar with social sciences will admit that often text itself is the very embodiment of ideas.

  1. A. Rameez published a journal article with 3 pages long content stolen straight from a journal article by Hazleton & Kennan (2000)

A. Rameez, being the sole author has published an article in KALAM -International Research Journal, Faculty of Arts and Culture, South Eastern University of Sri Lanka, Volume X Issue 1, 2016. The title of the Article is “Disasters and Social Capital in Sri Lanka: A Conceptual and Theoretical Analysis”.

A. Rameez’s Publication is available at http://ir.lib.seu.ac.lk/handle/123456789/5251  (available at SEUSL e-repository).

The figure below of the article by A. Rameez, with the stolen content highlighted in yellow, should indicate the proportionality of the content discovered to have been stolen word-for-word from just one single source (other stolen content not indicated):

A. Rameez has plagiarized for his publication from here (Scopus entry: Here )

A. Rameez’s publication (Page numbers 05 to 08 highlighted in Yellow) has copied the above mentioned publication by Vincent Hazleton and William Kennan (Social capital: reconceptualizing the bottom line; Corporate Communications: An International Journal Volume 5 . Number 2 . 2000. pp. 81-86) word for word from page numbers 82-84.

The figure below shows the proportionality of the content stolen word-for-word from the work of Hazleton & Kennan, with the portions in yellow being the stolen content.

Of about nine pages of writing contributed by A. Rameez for this journal issue, about three pages come straight from the composition of Hazleton and Kennan verbatim, even with citations as they appear in the work of the original authors, but without being listed in the list of references of the publication by A. Rameez! For example, we see the original article of Hazleton from year 2000 referring to articles by themselves from 1993, 1998 and 1999; but the article by A. Rameez only has the one by Hazleton from 2000 in his list of references, meaning that the readers (and obviously the reviewers of this SEUSL journal) would have no idea what those articles of Hazleton from 1993, 1998 and 1999 actually were/ are. Other examples include such questions of curious readership of Rameez on where they can actually locate the original works referred to as Monge (1987), Garfinkel (1967) etc., all of which, interestingly are properly listed at the end of the original, genuine work of Hazleton and Kennan (2000). Apart from this 3 pages long direct stealing of written scholarly work by Hazleton and Kennan that I have brought to light here, there are various other curiosity-provoking pointers to other possibly interesting findings that are possible from a thorough investigation on the rest of the 6 pages of this publication by A. Rameez; one such pointer for example is the curious question of what exactly Portes published along with Landolt in year 1996.

These two items above bring to light the evident lack of academic honesty & integrity on the part of Prof. A. Rameez and the evident lack of scrutiny and review practices of any level of rigor concerning the two publications above. It is interesting to note that we don’t see A. Rameez having published any work on healthcare seeking behaviour of the elderly other than the single abstract above plagiarizing the work of Odaman et al. It is also interesting to note that A. Rameez obtained his M.Phil. degree in 2010 by writing a dissertation titled “The Role of Social Capital in Disaster Management: A Study of a Tsunami Affected Coastal Village in Eastern Sri Lanka”, a work possibly very similar in theme to his publication in item 2 above (Disasters and Social Capital in Sri Lanka: A Conceptual and Theoretical Analysis); yet we find him after five years with the necessity to plagiarize to produce 3-pages long content for a journal article on a related topic.

Under these circumstances, it is evident that the intellectual con artist who produced the two fraudulent publications above is guilty of one of the gravest academic offenses: Plagiarism. Being non-hesitant, uninhibited and not-insightful about copying the published, reviewed works of other academics and scholars is a major evidence of academic bankruptcy of the person in concern. With such a history of Research Fraudulence, Professor A. Rameez being a Vice Chancellor of a Higher Education Institution, and thereby being the head/ chairperson/ overseeing authority/ supervising authority on almost all of its academic, academic-administrative and academic-disciplinary matters, can severely affect the academic and administrative integrity of the institution in question. This can lead to demolition of high standard academic culture, accountability and transparency in research and dissemination and the quality of the academic programs offered at the University.

Questions for the readers are below:

  1. What are the roles played by editors and reviewers (if any) of books of abstracts and journals published by the Faculty of Arts and Culture of SEUSL?
  2. What are the impacts on the undergraduate education and examination processes in this Sri Lankan state university
  3. When the Vice Chancellor is a demonstrated plagiarist and a research fraud?
  4. When a professor in a certain discipline is a demonstrated plagiarist and a research fraud?
  5. When an academic in general belonging a certain discipline is a demonstrated plagiarist and a research fraud?
  6. What are the impacts on the postgraduate education, postgraduate research programmes and examination processes in this Sri Lankan state university
  7. When the Vice Chancellor is a demonstrated plagiarist and a research fraud?
  8. When a professor in a certain discipline is a demonstrated plagiarist and a research fraud?
  9. When an academic in general belonging a certain discipline is a demonstrated plagiarist and a research fraud?
  10. What are the impacts on the academic administration processes including recruitment of BEST OF THE BEST academic staff and appointment of directors & heads of various divisions & departments at this Sri Lankan state university
  11. When the Vice Chancellor is a demonstrated plagiarist and a research fraud?
  12. When a professor in a certain discipline is a demonstrated plagiarist and a research fraud?
  13. What are the impacts on the disciplinary processes in academic matters at this Sri Lankan state university
  14. When the Vice Chancellor is a demonstrated plagiarist and a research fraud?
  15. When a professor in a certain discipline is a demonstrated plagiarist and a research fraud?

Exclusive:  Booker Prize Winner Robs My Manuscript – Rajpal

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“The recent Booker prize-winning book Seven Moons of Mali Almeida by Shehan Karunatilleke of Sri Lanka was blatantly plagiarized from a manuscript I sent the author in 2009. I sent it for review purposes only and I have the necessary documentation in this regard,” Rajpal Abeynayake, Attorney at Law, former Editor in Chief of Daily News and former Deputy Editor of Sunday Times, both are national newspapers in Colombo, told the Sri Lanka Guardian.

This is a very serious matter,” he pointed out. “Copyright law is in existence for a reason. Nobody can profit off the labours or the creativity of another person,” a lawyer by profession who is one of the most senior journalists in Sri Lanka, Mr Abeynayake added.

“In the West institutions such as the Booker Prize Committee would understand that rectitude and propriety in these matters are vital. Imagine if writers and other persons in the arts are given the lisence to crib from anyone as they please,” he observed.

“About this specific matter, yes, Shehan Karunatillaka stole my manuscript and based his novel on my work making cosmetic changes. It’s unconscionable. He should be held to account,” he demanded.

Christell Luxury Wellness launches revolutionary new own-brand skin and body care line

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Christell Luxury Wellness has unveiled an exciting newskin,hair, and body care line, under its own brand name “CHRISTELL”– its first-ever product offering, anda breakthrough expansion by the country’s leading cosmetology centre into the regenerative aesthetics space. At the launch event held on Saturday 29 October at the Shangri-La Hotel in Colombo, invitees were treated to an exclusive look into the uniquenew skin and hair care collection and also learn of how eachproduct holds the potential to answer some of the most pressing beauty quandaries.

All products in“CHRISTELL” featureonly the freshest and most superior ingredients, combining the natural healing properties of indigenous Sri Lankan herbswith the science of modern integrative medicine to produce the most effective results.Free of contaminants and synthetic elementsthat harm skin and overall health, all ingredientsfor the entire line are harvested at their peak, with only the most potent and active part of the plant incorporated into the traditional product making process.While supporting Sri Lanka’s economy through local manufacturing, this product line also empowers thelocal farming community as a result.

Skin care isn’t just targeted towards the skin, but alsoplays a crucial role in influencing our overall health and wellbeing. “We have come across many clients who have developed adverse side effects by using unsafe skin care products, and unfortunately the numbers keep increasing everyday,” said Dr Shanika Arsecularatne, Medical Director of Christell Skin Clinic.

“Over the years, our loyal clientele have been asking for products that we endorse for them to add to their beauty regime,”said Prof. Ramani Arsecularatne, Director of the Christell Skin Clinic, speaking at the event.“Christell Skin Clinic has been a pioneer in the Sri Lankan beauty industry, offering cutting-edge, non-invasive medical treatments for all skin, hair, and body care needs for over10 years now, and we decided that it was time we combine our deep expertise and clinical knowledge to formulate our own product range- as a take-home extension of our world-class cosmetology services.”

The CHRISTELL line of products will now be available for purchase from Christell Skin Clinic’s online store and as from all of its clinics across Sri Lanka.

[ Nadiyah Akram – Corporate Communications & Public Relations]

Following images were captured during the event;

Sunak: What He Doesn’t Want You to Know

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Prime minister Rishi Sunak – reportedly the richest MP in Parliament – would be a boon for the financial lobby, tax justice campaigners have warned.

As talk turns to the next Conservative leader, the man trounced by Liz Truss just weeks ago is now the favourite to replace her. But experts say Sunak has not been transparent with his finances and that his hedge fund background raises questions about his commitment to fighting tax avoidance.

His profile has risen sharply since he became chancellor in early 2020, just weeks before the first lockdown began. But critics say a slick public marketing campaign has disguised a man with an ultra-privileged background, who is a committed Thatcherite ideologue.

Here’s the openDemocracy guide to the man who might just end up as the UK’s next prime minister, originally published in January 2022.

He went to private school

Sunak marked his first year in the Exchequer by tweeting two photos of himself: one as a child in school uniform, and one as the chancellor, standing outside Number 11.

He wrote: “Growing up I never thought I would be in this job (mainly because I wanted to be a Jedi) […] It’s been incredibly tough but thank you to everyone who has supported me along the way.”

The message carefully tip-toed around his privileged upbringing. Until the age of 11, Sunak attended Oakmount Preparatory School and then the Stroud Independent Prep School,  the latter of which now charges fees of up to £18,500 a year.

From there, he studied at King Edward VI School in Southampton (now £17,000 a year) before moving to Winchester College (now £43,335 a year).

Five chancellors and one prime minister have attended Winchester, one of England’s oldest public boarding schools and a long-standing rival of Eton, before Sunak.

“[Sunak’s] tweet made me smile,” said Richard Beard, an author whose latest book ‘Sad Little Men: Private Schools and the Ruin of England’ assesses the private education system and the many politicians that have been through it.

“The idea that, while studying in Winchester College, he would have never thought he would be at the top of government is very unlikely to me. Leadership qualities are one of the things that they teach you and you’re bound to think of your future in those terms.

“So he would definitely have thought that that is the kind of job that he’d be in, even if he didn’t explicitly think of chancellor of the exchequer.”

In media profiles, Sunak’s allies describe him as “immaculate”, “calm” and “organised”, qualities befitting of a former Winchester head of college. None volunteer that he is empathetic or compassionate. When given examples of people who are experiencing hardship in Parliament or press interviews, as he was on ‘Good Morning Britain’ last year, Sunak listed policies in response, but offered no consolations.

Beard, whose book is partly based on his own experiences, believes all-male boarding schools emotionally harden their students. To survive, he says, boys cannot show any vulnerability among their peers.

“If you repress emotion for yourself then ultimately it becomes very easy to repress feelings for other people,” he argues.

And while boarding schools like Winchester may prepare students well to advance in politics, Beard says they instil a worldview that is far from ordinary.

“Money is at the centre of it all because everyone knows it costs a lot of money, including the boys, but the actual money is abstract. The needs of everyday life are simply taken care of for you,” said Beard.

“How can you actually then think in terms of people struggling for five pounds and ten pounds?”

He cut benefits

Last year, Sunak was heavily criticised for axing a £20-a-week increase to Universal Credit that had helped some of the poorest families through the pandemic. More than 200,000 would have been pushed into poverty as a result of the cut, according to research by the Joseph Rowntree Foundation.

Just weeks before the cut was confirmed in July, the chancellor requested planning permission to build a private swimming pool, gym and tennis court at the Grade II-listed Yorkshire manor that Sunak and his wife, Akshata Murty, purchased for £1.5m in 2015.

After several MPs from his own party spoke out against the Universal Credit cut, Sunak increased in-work benefits in his Autumn Budget – but not by enough to offset the cut.

He has a lot of money

The Sunaks’ Georgian mansion, where locals described attending parties with liveried staff pouring champagne from magnums, is not the only property they own. There is also the £7m, five-bedroom house in Kensington, west London; a flat, also in Kensington, that the couple reportedly keep “just for visiting relatives”; and an apartment in Santa Monica, California.

The chancellor’s extensive property portfolio is just one source of his wealth. After studying at Oxford University, Sunak went on to work for US investment bank Goldman Sachs for four years. He left to pursue a business degree at Stanford University in California, where he said meeting influential figures in the multi-billion US tech industry “left a mark” on him.

From there, Sunak had a stint working at hedge funds back in London. He was a partner at the Children’s Investment Fund (TCI) where he is believed to have made millions of pounds from a campaign that helped trigger the 2008 financial crisis.

Sir Chris Hohn, the fund’s founder paid himself a record £343m in the first year of the pandemic. TCI is ultimately owned by a company registered in the Cayman Islands, according to its accounts. Its philanthropic arm, the Children’s Investment Fund Foundation (CIFF), donated £255m to charitable causes last year (full disclosure: openDemocracy has received funding from CIFF since 2019).

Sunak then left to co-found his own firm Theleme, which had an initial fund of £536m – and is also registered in the Cayman Islands.

His financial interests aren’t very transparent

The Cayman Islands are one of the world’s top offshore tax and secrecy havens. When an investment is made through a hedge fund in the Caymans, “nobody can possibly know where the money has come from”, said Alex Cobham, the chief executive of the Tax Justice Network.

Not all the money that goes through the Caymans is dirty, and hedge funds argue that they need to keep their investment strategies secret to be competitive.

Nevertheless, “it is probably the best, certainly the most reputable, way of allowing fairly questionable money in large volume to go into mainstream financial markets,” said Cobham.

An estimated $483bn (£357.62bn) a year is lost in cross-border tax abuse by multinational companies and by individuals hiding assets in havens like the Cayman Islands, according to the Tax Justice Network.

“Somehow, in the financial sector, we still have this idea that it’s basically smart to game the system. If these are the people, and the culture, that is coming into public life then we’ve got a real problem,” said Cobham.

When Sunak became a minister in 2019, he placed the investments he held from his years of working in finance into a ‘blind trust’. Such agreements are intended to avoid conflicts of interest by handing over control of assets to a third party, but whether that works in practice is questionable.

“These trusts don’t necessarily come with any legal mechanism to prevent the owner of the assets actually dictating what happens, or indeed seeing through any claimed blindness,” said Cobham.

“If politicians were willing to make the arrangement transparent, including the legal documents, we might have some confidence in them,” he adds.

Sunak has declared the trust in his entry on the Register of Ministers’ Financial Interests, but not the contents of it. The rest of his disclosures are remarkably minimal for a man with an estimated net worth of £200m.

Aside from the trust, he has listed his London flat and the fact his wife, Akshata Murty, owns a venture capital investment company, Catamaran Ventures, which the couple founded together in 2013.

Murty, who Sunak met at Stanford, is the daughter of Indian billionaire NR Narayana Murthy, who co-founded the IT company Infosys. Her shares in that firm are worth £430m alone, a fortune larger than the Queen’s and enough to make her one of the richest women in Britain.

The Murthy/Murty family (Narayana’s children have dropped the ‘h’ from their name) is reported to have invested part of their wealth through Catamaran Ventures, though how much is unclear. Sunak resigned his directorship of the company in 2015.

Ministers must declare the financial interests of their close family – including in-laws – which might give rise to a conflict, but Sunak has declared only one of the companies that his wife owns. A host of other family assets – including a £900m-a-year joint venture with Amazon in India, owned by his father-in-law – are not mentioned, according to the Guardian.

Sunak is said to have met with the government’s then head of propriety and ethics, Helen MacNamara, before becoming chancellor, to review what interests should be declared. MacNamara said she was satisfied with what had been registered at the time.

He has strong links to right-wing think tanks

Sunak reportedly led the hawks within the cabinet who opposed taking action when scientists recommended a circuit-breaker lockdown in September 2020, arguing that restrictions would be too economically damaging. Johnson delayed the decision and infections spiralled leading to a more punitive and lengthier lockdown in November.

“Sunak’s been the voice most consistently pushing for watering down of COVID restrictions in the cabinet. So, if you like, he is a kind of a logical continuation of that Thatcherite impulse within the Tories,” said Phil Burton-Cartledge, the author of ‘Falling Down: The Conservative Party and the Decline of Tory Britain’.

Soon after becoming an MP in 2015, Sunak wrote a report calling for the creation of ‘freeports’ around the UK for the right-wing think tank, Centre for Policy Studies (CPS), which was co-founded by Margaret Thatcher.

The policy idea – that tax-free, deregulated outposts will revitalise post-industrial coastal cities – was fittingly tried by the former PM in the 1980s, before being dropped by David Cameron in 2012 after proving unsuccessful.

Sunak also worked for another right-wing think tank, Policy Exchange – which, like CPS does not declare its donors – before becoming an MP, and has spoken at the Institute of Economic Affairs since becoming chancellor. All three think tanks have been consistently ranked among the least transparent in the UK.

He has a slick PR operation

During the pandemic, billionaires such as NR Narayana Murthy saw their wealth increase – Murthy’s fortune was up 35% to £2.3bn in 2021– while inequality between the richest and poorest grew. What, then, explains the seeming popularity of a former hedge fund manager like Sunak at a time in midst of a cost of living crisis?

Part of the answer might be the way Sunak has presented himself. Unusually for a chancellor, he hired the co-founder of a social media agency to manage his public image after he was appointed.

Since then, the content on his social media channels – from casual ‘ask me anything’-style YouTube videos to puppy pictures on Instagram – have more closely resembled a celebrity influencer than a frontrunner for Tory leader.

Jonathan Dean, an associate professor of politics at Leeds University, says this reflects broader political trends: “Forms of celebrity are increasingly prominent within politics, and that can either take the form of people who were conventional celebrities entering electoral politics, or it can also take the form of politicians trying to ape the publicity and performance traditionally associated with celebrity culture.”

Politicians draw on tactics from the world of celebrity influencers, Dean suggests, partly because they can mask their political views.

“A lot of politicians don’t have a particularly coherent or well-thought-through set of ideological commitments or kind of policy ideas. And I think certain forms of celebritisation allow them to circumvent that,” he said.

In Sunak’s case, it seems he has been even more successful in influencing journalists than the public. A picture of him working from home in a hoodie became a media frenzy after columnists from Vogue and GQ complimented his looks, which, in turn, spawned mockery on social media. It wasn’t long after that Sunak was being asked how he felt about being described as ‘Dishy Rishi’ in an interview with LadBible.

While Sunak may be the most popular Tory politician among the public, among party members he is second to the foreign secretary Liz Truss, his main rival for Tory leader if Johnson goes.

Burton-Cartledge suggests that this might be because he has not demonstrated the same zeal as Truss for pursuing a ‘war on woke’.

“He is of the same mould as Cameron: economically Thatcherite, but socially liberal,” said Burton-Cartledge. “That said, I can’t see him rowing back on the tough rhetoric about migrants in the Channel.”

Views expressed are personal

Why is Saudi Arabia Defying the US?

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3 mins read

Why is Saudi Arabia suddenly defying the United States, after five decades of a strong alliance? It’s a question I’ve been asked frequently in recent days.

Here’s the answer.

I describe in my books the deal that I helped forge in the early 1970s that created this alliance. Known as the Saudi Arabian Money Laundering Affair (SAMA), it can be summarized as consisting of the following five agreements:

  1. Saudi Arabia will invest most of the petrodollars made from selling oil to the world in US treasury securities;
  2. The US Treasury Department will use the interest from these securities to hire US corporations to modernize (“westernize”) Saudi Arabia, building petrochemical plants, ports, highways, and entire cities;
  3. Saudi Arabia will maintain oil prices at levels acceptable to Washington and American oil companies;
  4. Oil will be traded on international markets only in US dollars (the power of the dollar had been jeopardized when President Nixon took it off the gold standard in 1971 because the US was unable to pay foreign debts in gold – this fourth agreement essentially established a new standard for the dollar, the Petro-standard); and
  5. The US will guarantee to defend and protect the royal family of Saudi Arabia and keep it in power as long as the above four agreements are honoured.

For 50 years Saudi Arabia honored the first four agreements.

As is well known — the US honored the fifth. It flew members of the Saudi royal family out of the United States after 9/11 when all flights had officially been prohibited. It turned a blind eye to evidence that the royal family had sanctioned the assassination of Jamal Khashoggi, a Washington Post columnist and critic of the Saudis.  It launched Operation Desert Storm against Iraq when Saddam Hussein threatened Kuwait and, by implication, Saudi Arabia. And it took many other less known, behind-the-scenes actions to maintain the alliance forged by SAMA.

So what happened? Why is Saudi Arabia no longer responding to Washington’s wishes and instead cutting back on petroleum production and thereby helping Russia earn income vital to its war in Ukraine? The answer is more complicated than the obvious one – that Saudi Arabia simply wants to increase the price of oil.

First of all, it’s important to recognize that SAMA was established in the early 1970s when the United States was the world’s most powerful economic and military power. As I write in my new book, Confessions of an Economic Hit Man, 3rd Edition: China’s EHM Strategy; Ways to Stop the Global Takeover:

For us in those days (the 1970s), the threat to America’s global dominance was Communism and the Soviet Union. Most of the Middle East (including Saudi Arabia) opposed both. Kings and dictators were not about to accept Marxism. Muslims were against atheism. The Soviet invasion of Islamic Afghanistan further encouraged Middle Eastern Muslim leaders to partner with the US.

Today, US hegemony is seriously threatened by China’s skyrocketing economic and military power, the Communist Soviet Union has been replaced by a monarch-like regime in Russia, and US wars in Islamic Afghanistan and Iraq have angered traditional Muslim leaders in Saudi Arabia and elsewhere. The US is no longer trusted to keep its previous agreements because many were discarded during the Trump administration. Furthermore, the ability of the US Congress to reach compromise is seen by the Saudis, as well as much of the rest of the world, as proof of America’s inability to perform as a functioning democracy.

Adding insult to injury, the Petro-standard is being threatened for the first time in fifty years. China is already buying oil from Russia with yuen. And, according to the Wall Street Journal:

Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.

Another important factor: Although the alliance between China and Russia is somewhat fragile, this alliance impacts many other countries. Five nations that are major economic drivers on their continents are united under the very powerful BRICS bank (Brazil, Russia, India, China, and South Africa). Saudi Arabia is dependent on these five countries and their neighbours through a complex network of oil and other trade agreements. Riyad is not likely to jeopardize these agreements by continuing to bend to Washington’s wishes.

Why is Saudi Arabia defying the US?

A cartoon shows a Saudi prince holding an old-fashioned balancing scale in one hand. Hanging from one arm is the US flag; from the other, China’s flag. China’s clearly outweighs the US’s.

Unfortunately, the Saudi prince could be replaced by leaders in many Asian, African, Latin American, and Middle Eastern nations.

From Saudi Arabia’s standpoint, its decision to abandon SAMA is pragmatic. It is also a symbol of the shifting sands of global power.

Sri Lanka: “Saving” the Economy

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5 mins read

The economy is shrinking

The economy can be likened to a train engine pulling carriages up a hill.

The engine represents the wealth-generating component of the economy, which is the private sector. This is because the existence of the private sector depends on profits, and since profits are an increase in value over costs, the private sector is always a surplus to the economy. The carriages, on the other hand, are in the government sector. Though this sector is important, it relies on private sector resources to maintain its size.

Despite the efforts of the engine to pull the carriages, the train has stopped moving forward and is now sliding back down the hill. This is the Sri Lankan economy in recession. Currently, there is a lack of foreign investment and the local private sector is the only means to stop the slide.

The government sector is doubly burdensome

The government obtains private sector resources through inflation (money printing), or seizes resources through taxation. What resources the government sector consumes becomes unavailable for the private sector to use. Thus the government sector is doubly burdensome to the economy, as on the one hand its weight must be pulled along by the private sector, and on the other hand, it is starving the private sector of valuable resources needed for growth.

In order to stop the slide and start to inch up again the first priority is to reduce government expenditure. Just as the current size of the government sector is doubly harming the economy, a reduction in size will provide double the relief. It will have the effect of both lightenings the carriages and increasing the size of the engine.

The importance of savings

The main resource of the private sector is savings. All economic growth takes place when entrepreneurs in the private sector make capital investments from savings. It is therefore vital to note that savings is the source and lifeblood of any economy, and the encouragement of savings translates to the encouragement of the economy.

What is savings

Savings come from underconsumption. By saving, the individual forgoes spending money today for some future date. In addition to improving discipline through thrift, savings also helps to prepare for unforeseen events such as medical emergencies, job losses, natural disasters and so on.

If the individual deposits money in a bank (as is often the case) the bank is able to lend that money to entrepreneurs for investment. Bank deposits make the savings of individuals available to the wider public, and in so doing more easily facilitates economic growth.

If the individual saves money outside of the banking system, such as by keeping it under a pillow, the economy is still improved. This is because prices of goods and services are a function of money in circulation. When money is removed from circulation, prices will correspondingly fall.

In the following sections, the negative impact of economic policies on savings will be discussed in brief.

Individual income taxes must also consider expenses

The income taxes for companies are on profits (i.e. income after expenses), but the income taxes for individuals have no relief from expenses (e.g. medical, food, rent etc.).

This creates a situation where an individual with high expenses may have to use savings to pay for income tax. This is unfair and particularly damaging to employees and fixed-income earners.

The income tax law should therefore be amended to take account of expenses and be consistent with corporate tax law. This will benefit savings in society.

Corporate taxes and income taxes are a double whammy

Private sector business is facilitated by profit margins, i.e. the percentage difference between the selling price and the costs. Corporate taxes are one such cost to businesses.

If the tax increases so must the selling price in order to maintain the profit margin, or the business will cease to exist.

Thus corporate taxes are simply an indirect tax to consumers. The government has now increased corporate taxes. This is counterproductive as that cost, when passed on to employees or fixed-income earners, diminish their ability to save.

Employees and fixed-income earners are in effect, doubly taxed as they must pay both the corporate tax and income tax.

The impact of marginal taxes on savings

If income increases so also does savings ability. The government must therefore incentivise earning higher income.

The current policy of higher marginal taxes can cause individuals to refuse higher salary in favour of other non monetary benefits. This is so that they can try staying within a lower tax bracket.

The policy also contributes to the brain-drain to foreign nations where an individual may be better able to hold on to their earnings.

Though marginal tax policy is common globally it is counterproductive to economic growth as it influences the wrong behavior in employees and discourages savings.

Income taxes are counterproductive

Due to the aforesaid reasons income taxes are counterproductive to the economy. They are a burden and cost to business and individuals, difficult to administer for the government and substantially hurtful towards employees and fixed income earners.

The government would therefore do well to abandon this means of income completely and focus on the consumption tax (e.g. GST) as a means to earning what it needs.

How interest influences savings

The incentive for individuals to deposit money in banks is the interest rate. If inflation is higher than interest, savings is discouraged and consumption is encouraged.

Interest rates are related to money availability. The more money banks hold, the lower the interest must go. A society that is unable to save will have high-interest rates reflecting the scarcity of saved money.

Central bank (CBSL) printing discourages savings

In Sri Lanka, the savings interest is relatively high when compared to what is global, but it not as high as inflation (measured at about 50% in June). Sri Lankans are therefore being encouraged to consume and not save.

The reason why interest is low (in relation to inflation) is because banks are indirect recipients of free money printed by the central bank (e.g. through public sector deposits).

In order to raise interest rates and encourage savings, the central bank must stop printing. This will create money scarcity in banks, which will cause interest rates to exceed inflation naturally.

Capital controls

The government has implemented capital controls which prevents individuals from holding significant amounts of foreign currency. Holding wealth in foreign currencies is particularly attractive now due to central bank-induced inflation.

These controls have the unintended consequence of discouraging Sri Lankans abroad from transferring their savings to local banks. Foreign remittances are therefore not taking place as they should.

The government should remove capital controls in order to encourage remittances.

Conclusions

The government is adopting common traditional methods to restore the economy. These methods are not universally applicable and in the context of Sri Lanka will fail. The government must revise its stance and think out of the box by focusing on savings as a priority.

Savings are the lifeblood of the economy. In order to improve savings the government must reduce expenditure first. In addition the policies of income tax, marginal tax, money printing and capital controls discourage savings and must be revised.

As a means to address budget deficits taxes have been increased. This will have the effect of diminishing the strength of the (already weak) engine thereby causing the slide down the hill to become uncontrolled.

As a consequence the LKR may lose all of its value and hyperinflate. The economy will lose a substantial portion of its remaining vigor. The brain-drain will reach unprecedented levels hitherto unseen, and food starvation of a broad segment of society can become reality. The government must therefore reverse this policy before it’s too late.

Sri Lanka: Outline of a Redistributive State

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20 mins read

A clear line against political repression is beginning to emerge within democratic opposition forces in Sri Lanka, or broadly speaking, those who oppose the current government of Ranil Wickremesinghe. But the crisis of the old order requires thinking more about the relationship between politics and economics that is materialised in the State. The people’s movement has been a multi-class phenomenon with antecedents in earlier forms of working people’s politics. But a hegemony with a progressive, class-based perspective will likely continue to develop within it. We can anticipate this trend because price hikes and other increases in the cost of living are already revealing the extreme inequality of austerity measures.

Moreover, even with the recently announced preliminary agreement with the International Monetary Fund (IMF), Sri Lanka’s economy will continue to experience depression. The economy could contract by as much as a tenth this year alone. We would have to go back to the Great Depression of the 1930s to encounter a similar crisis. The solutions, which the Wickremesinghe government is promoting in the guise of the IMF agreement, are designed to further implement a failed neoliberal agenda that was in fact responsible for the economic breakdown.

Accordingly, the outline of the agreement and the broader economic programme it represents do not inspire hope. Through a dramatic combination of regressive “reforms” and shock therapy, including by hiking interest rates and raising prices for essentials such as energy, the current proposed path to recovery offers the minimal promise of an eventual return to ‘normal’. The ‘old normal’ was already extremely inadequate for many people before the current crisis. It is now an even worse proposition given the extent to which the ongoing economic collapse has immiserated many more. More than a quarter of Sri Lankans are food insecure according to the United Nations’ own estimates, and the poverty rate has risen dramatically.

In this context, there is a clear gap between the naïve rhetoric of policy makers about returning to international capital markets, and the wide-ranging aspirations that were stimulated in such an intense way by the people’s movement, especially the uprising on 9th July to oust President Gotabaya Rajapaksa. What can now be done, given the desperate need to formulate a programme despite uncertainty about whether political forces are organised and invested in pushing it? Would such a programme be a mere recipe for the cook-shops of the future, as Marx might put it? Or could it help initiate the delayed yet necessary dialogue about transforming the relationship between State and society on which democratic opposition forces could continue to build?

To broach this subject, it seems, at first sight, that we must be cautious. We recognise that the people’s movement has been wide and disparate, containing at-times contradictory views on the political, no less than the economic, changes required. But it is also true that there is an advantage in clarity when a self-aware faction within a movement emerges with a clear direction. Our focus should be to help consolidate that perspective.

Whatever diffuse support is lost, especially among ambivalent sections of the middle class and among the elites, more is gained by properly evaluating the stakes of the struggle. The amorphous mass of popular opposition becomes solidified around the section of it that has the necessary force to break through walls of repression and political decay. Meaning, if a progressive, class-based perspective emerges within the people’s movement, it can better persuade the base of working people on whom it implicitly – if not explicitly – relies on, that it has the will to offer a real solution.

For those looking to debate the economic features especially of this programme, the challenge is to maintain a historical perspective, to avoid becoming wrapped up in arbitrary details of policy and losing sight of the underlying paradoxes that must be weighed. This is not to say that stylised facts, as economists call them, are not useful. Nor does it mean that we should not get into the “‘boring and routine world’ of administrative rule-making,” as Urs Geiser, quoting Jacob Babu and Suraj Jacob, points out. The point is one of emphasis, that there is a great need for more work in parallel on the conceptual side. In addition, when we move from the realm of empirical debate to principles, the dangers of political sectarianism also become strong. Nevertheless, there needs to be a clear push, and a risk taken, in presenting an outline for such a programme, even if it may appear utopian on first sight.

The stakes are especially high given the context of ongoing repression, including the jailing of activists under the Prevention of Terrorism Act (PTA) and other moves to try and suppress dissent during an extraordinarily critical period for Sri Lanka. This makes it even more imperative to draft a programme that enables broader masses of people to identify why such repression is not only morally but also politically wrong, insofar as it blocks a progressive solution to the economic crisis.

How the Left Thinks about the State

There is a clear historical precedent for linking the battle between democratic and authoritarian forces to a broad horizon of change. On the eve of the European Revolutions of 1848, Marx and Engels launched The Communist Manifesto by distinguishing utopian socialism from communism. It was not for the sake of arguing, however, that their analysis was the final word on what communist society would look like. Rather, they outlined the historical framework within which the transformation of social relationships could be grasped, and the conditions that would have to be met for a radical programme to be effective. When, over the course of their writings, they shifted to the register of active political debate, they recognised that it had the logic of polemic.

Marx and Engels did not assume that the specific contours of communist society were guaranteed. Instead, their politics drew from an intuitive sense of the alignment of forces, thereby revealing tasks before the movement. Lenin and Luxemburg took this debate to the next level. They participated in twin, pivotal moments of revolutionary ambition of the 20th century, the Bolshevik Revolution of 1917, and the failed German Revolution of 1919. These revealed many of the strategic paradoxes with which the left around the world has continued to grapple. Or as Perry Anderson (1976) put it, “The classical debates, therefore, still remain in many respects the most advanced limit of reference we possess today. It is thus not mere archaism to recall the strategic confrontations which occurred four or five decades ago” (78).

We are separated from this revolutionary experience by the tremendous gap between 19th and 20th century Europe and the 21st century global South. In addition, there has been much deeper historical interrogation and uncovering of revolutions outside the European core that also yield important lessons. Regardless, there is a universal truth that must be rekindled if the current people’s movement in Sri Lanka is to push further, namely by thinking about the role of the State in social transformation. Among the many differences between the ascendant proletarian movements then and diverse oppositional movements today, the fact is that the current global moment is not conducive to radical change. There is no singular example of a programme that can be enacted to reconstruct society on more egalitarian foundations in the aftermath of what, in Sri Lanka’s case, has become an existential crisis. But there are tendencies, which, if thought carefully in terms of the existing political divide between progressive and reactionary forces in the country, may offer the basis for the triumph of the former over the latter.

Right now, given the neoliberal assault on State institutions and the imposition of austerity measures, the most critical part is theorising a more productive role for the State, specifically its mode of intervention into the economy. Up to now, neoliberals have attacked the welfarist dimension of the State. Those who oppose them may feel the need to defend it. But the latter position need not imply that the State itself is neutral. The State remains embedded in the capitalist system, with all the distributional consequences that entails. Instead, our point is to argue that forcing a debate over the class character of State intervention means explicitly raising the question, who benefits from its policies?

In this sense, when we talk about the retreat of the State in areas such as subsidies for essential goods, we are saying that this phenomenon is in fact a manifestation of the class power that the capitalist class has over the State. Talking about the retreat of the State or the need to expand it is often an inadequate shorthand for a much more complex theorisation that is required to understand the way in which the State reproduces the social order, but also the ways in which it can become a site of struggle. Marxist theorists such as Nicos Poulantzas have provided some of the most subtle analysis for thinking about these issues. Their theorisation, however, is distinct from the punchy rhetorical demands on the street for the State to provide solutions to working people’s problems.

If we now try to mediate between theory and political rhetoric, how can we propose a type of State that aligns with a progressive, class-based transformation of society? Moreover, how can we recognise the limits of what would inevitably be a challenging task, given the dominant social forces that would be arrayed against such a State? We can frame the paradox in two ways. First, for the opposition to neoliberalism that can consolidate within the people’s movement in Sri Lanka, the urgent need is to envision an alternative set of principles on which a redistributive State could act. Second, the reality is that until a revolutionary global conjuncture materialises, this State form will remain part of a taxonomy of capitalist States. It is critical to keep the latter in mind, to be able to push the debate in more intuitive ways. Specifically, avoiding over-extending by either moving faster than the base-building required or by inviting reaction and even external intervention that the movement is unprepared to confront.

Depending, however, on the way in which a redistributive State in Sri Lanka comes into being, it could provide the ground on which progressive forces could continue to advance during the decades ahead. It could even inspire movements in other smaller States in the periphery that are experiencing similar challenges during the multidimensional crisis of the global order, which has been marked by dramatic events such as the Covid-19 pandemic and the war in Ukraine. We can begin by grouping the core features of a redistributive State under three tentative headings: planning, investment, and welfare.

The Nature of Planning

In Sri Lanka, the current government of Ranil Wickremesinghe has slapped restrictions on imports. In this regard, it follows its disgraced predecessor in recognising, whether it wishes to or not, that the previous system of the free flow of goods and services has become unsustainable because of the balance of payments crisis. The latter was a long time coming. It was built up through the opening of the economy after the election of JR Jayewardene in 1977, and then the shift to foreign borrowings to cover the current account deficit. Now the neoliberals are blaming the State for unrestrained spending, especially the so-called loss-making State institutions, such as those that provide energy at subsidised prices to the public. But the reality, as demonstrated by the import restrictions, is that at its core, the current crisis represents the breakdown of the market. The desperate need is to revive planning to rebuild society.

If we specify the problem in terms of prioritising imports, this points to a deeper question about which sectors matter, and who should be able to acquire the goods necessary for Sri Lanka to gain self-sufficiency in critical areas. Or as Maria Mies (2014) put it, “Only societies which are to a large extent self-sufficient in the production of these basic necessities can maintain themselves free from political blackmail and hunger. In this, self-sufficiency in food is the first requirement” (219, emphasis in the original). Samir Amin (1983) clarified by noting that “Although a self-reliant development model is not in theory synonymous with autarchy (economic self-sufficiency), it may lead to it whether we like it or not, for obvious internal and external political reasons…So, although autarchy in itself is not synonymous with self-reliant development (think of Burma), it may be the condition for it under certain historical circumstances” (548-549; see also Amin 1987: 442-443).

Given the potential negative connotations of autarchy, it may be useful to further distinguish it from self-sufficiency. We could use the concept of self-sufficiency to identify the strategic necessity of being able to provision essentials within a national territory, as opposed to autarchy, which implies a more rigid notion of isolated monads within what remains an interconnected global order. Even if we manage to successfully decouple self-sufficiency from autarchy, however, difficulties still arise when operationalising the concept in practice. Specifically, when we talk about planning to achieve self-sufficiency, we recall visions of the vast bureaucratic operations of alienated States that claimed to practice ‘actually existing socialism’. The reality, however, is that there are different forms of planning, just like there are different market regimes.

The question is not so much whether Sri Lanka should plan, but the way in which it should be carried out. If we distinguish between capital, intermediate, and consumer goods, then planning would require an institutional space—for example, let’s call it a planning unit—in which different associations of producers, distributers, and consumers could openly debate the sectoral weights according to which items should be imported. The level of detail does not need to be overwhelming. Instead, it could be an opportunity to create new classificatory bands for goods, so that Sri Lanka’s economic trajectory can be managed with the appropriate perspective.

This would further require the State’s light yet steady hand in providing direction. It could create broad targets within a progressive macroeconomic framework that aims to reduce the disparity between rural and urban areas, for example, while leaving the finer points to be resolved by committee. The latter could include a representative mix of people who reflect diverse needs, including farmers, fisherfolk, migrant workers, manufacturing workers, and so on, in addition to the usual bureaucrats and businesspeople.

The main point is that planning by prioritising imports would necessarily entail much deeper questions about the structure of the economy. For that, the answer can only be discovered by further articulating a progressive vision. Moreover, we would also have to recognise that overcoming the deeper divisions of the global capitalist economy in the long run would require constructing an alternative geopolitical bloc with that explicit goal in mind. In this regard, an orientation toward self-sufficiency precedes the much bigger goal of collective self-reliance. The latter is a much more ambitious project that would require reviving or building international alliances rooted in democratic aspirations, along the lines of past examples such as the Non-Aligned Movement.

Realising Social Objectives through Investment

Given that planning by prioritising imports is only the start, the follow-up question is what type of investment would be required to transform the economy. The idea that deficit spending should be curtailed to meet fiscal surplus targets has become part of the common sense of a potential agreement with the IMF. But the reality is that Sri Lanka cannot recover from the economic crisis without severe, long-term scarring unless it engages in what economists refer to as countercyclical spending. What that means is that because the country is in a slump, and private investment is withdrawing, only active intervention by the State can sustain the key sectors that are necessary for people’s livelihoods. The novel critical dimension for Sri Lanka is the need for this investment to improve metrics of self-sufficiency, to reduce the import burden.

As for those who currently depend on imports for livelihoods, there will also have to be explicit steps taken to create opportunities within a more redistributive economic system. But that is a strategic question for the political forces that aim to bring together opposition to the failed market mechanism. Meanwhile, the notion that the vast gap between supply and demand can be resolved by drawing in foreign investors eager to do business is a pipe dream at best. It will provoke even greater catastrophe at worst. Sri Lanka cannot wager the risk. Many central banks in core countries are raising interest rates and financial conditions are tightening, which provoke outflows of capital from so-called emerging markets. In addition, longer term trends will continue to disrupt trade, including geopolitical polarisation and climate change. In this context, there can be no question about the need for public investment to reduce supply constraints that have become the justification for rising prices. But the way in which investment is channelled may matter even more than the headline amount.

So far, the debate about the supposed illegitimacy of State intervention has focused on the latter, insofar as it supposedly represents the lack of fiscal restraint. In this way, neoliberals have managed to confuse sections of the public about the State-led investment necessary to rebuild the economy thanks to cheap rhetoric about corruption and exclusive focus on the political class, to the neglect of structural issues. This is not to say that politicians who abuse public resources should not be held accountable. But the way in which we conceive this process hinges first on articulating a positive understanding of State capacity. The mechanism for disciplining politicians must be predicated on accepting the value of State intervention in line with a new, egalitarian direction for the economy.

The reality is that Sri Lanka never fully overcame its dependency on colonial-era institutions, especially the plantation system. Instead, its dependency was reconfigured but nevertheless sustained through new forms of subordination. That has included the narrow targeting of investment toward sectors in which wage repression is the norm, especially garments, and the resulting use of debt to cover the current account deficit when the terms of trade continued to move against Sri Lanka. The previous regimes since the late 2000s, including those led by the Rajapaksa family, exacerbated the problem through financialisation, especially the most visible issue of sovereign debt.

The structure of Sri Lanka’s production has never been oriented in its entirety toward the needs of its working people. Even the late, State-driven efforts after independence to try and industrialise were predicated on creating the conditions for private accumulation in light industries that were protected behind import barriers. This contrasted with an alternative project to transform the economy that would have required releasing the “suppressed creative energy of the entire rural community” (104), as GVS De Silva (1973) put it.

Because of the scale of the current crisis, the question of the alternative to dependency confronts Sri Lanka with renewed force. That includes the need to promote self-sufficiency to lower the cost of the wage goods, especially food, on which working people depend. This further requires redistribution to create appropriate levels of sectoral balance according to efforts to bring working people’s incomes in line with the highest possible standards, or what Amin (1987) called a national law of value (439-440).

Shifting the focus to agrarian relations, for example, requires simultaneous class-based interventions to facilitate production, transportation to market, and retail. That includes breaking cartels in the agricultural sector by providing public alternatives for wholesaling and retail, in addition to land reform, innovating with efforts to extend credit to producers—especially those who can work together through voluntary association—and scaling up the processing of agricultural goods by cooperatives. In the language of economics, this would primarily involve an agrarian demand-led transition (Adelman 1984). But it must be framed in terms of class (Bharadwaj 1988; Ghosh 2005).

The reason why class is an effective dimension not only in theoretical but also political terms is because it has the potential to create a deeper sense of solidarity among people. It could enable even those who benefit even in more minor ways from the current system to challenge the wider process of marginalisation of rural areas in which powerful local actors play a key part. Of course, whether initiatives to redistribute land, extend credit, support cooperatives, and generally weaken the strength of cartels, for example, are capable of being articulated in terms of a radical politics depends on the strategic capacity of activists and others to make these concrete issues for people. In the meantime, the rural will remain a key site of the politics behind a progressive solution to the economic crisis.

On a broader level, as Amin (1987) put it, to think about delinking from the global imperialist structure requires a political commitment to autocentric development in which public investment is channelled not according to the criteria of profitability as such, but rather the ability of industries to accommodate working people’s needs (436). This does not mean that there is no scope here for private accumulation. Again, given the extent to which the redistributive State remains a capitalist State, a key aspect of its legitimation in fact requires recreating stable conditions in which private capital can operate. But the underlying infrastructure of the economy must be established with a particular vision in mind; one that does not focus on importing or producing luxury goods but producing wage goods at home instead.

This conclusion, especially the scope given for capitalists to continue to operate, may seem ambiguous. But after many failed revolutionary projects, the reality is there will always be an inherent tension in the process of social transformation. One must not overestimate popular support or underestimate the opposition of dominant social forces. The actual trajectory of a redistributive State in Sri Lanka would depend on many levels, including the international conjuncture, which right now inhibits an outright revolutionary overthrow of capitalism. But there is still value in thinking through a viable path to radical transformation, which can cultivate resistance in the periphery without opening itself to brutal counterattack by over-extending.

Meanwhile, concrete efforts to stimulate food production, for example, could be thought in terms of creating the backward linkages necessary to further reduce dependency in other areas. These could include, for example, eventual plans for domestic fertiliser production, based on both the scale of the market for such inputs and their strategic necessity. Enterprises could be further exposed to foreign competition on a clear timeline once they have developed sufficient capacity. It would also mean considering the wide-ranging possibilities for what Amin (1974) referred to as “autonomous scientific and technological research in the Third World” that inspired a vast and barely rediscovered range of heterodox thinkers (19). They focused on reconceiving the entire basis on which changes in productive technique could be applied through the corresponding transformation of social relations of production.

Whether the industries that are created could be repurposed for the realisation of new, creative needs would depend on the growing social consciousness of people engaged in a collective project to bend capital toward their own purposes. Furthermore, framing State intervention in this way would undermine the politics of patronage, or what economists call rent-seeking. The relevant communities—in which deeper organising could also be undertaken—could supervise public investment and where it is directed. They could do so through the creation or use of existing forms necessary for mobilisation to overcome the economic crisis, such as village committees, Provincial Councils, and even committees that could be established within parliament once it has obtained the people’s mandate through elections and a referendum to abolish the executive presidency.

These efforts would further strengthen more substantive aspirations to institutionalise new forms of popular representation and to convene a constitutional assembly in society at large. Or as Hasini Lecamwasam has suggested, “cooperatives, community level organisations, small-scale unions, and other such bodies already active at the community level could be mobilised to come together as a federation, representing the interests of their communities”. Already there are global examples of similar experiments, such as the participatory budgeting process devised in the Brazilian city of Porto Alegre. The point is not to fixate on layers of bureaucracy for their own sake, but to strengthen the democratic institutions that can interface between State and society, including those created for the purpose of resolving the national question. Moreover, these efforts dovetail with historical discussion within socialist circles as well about the concept of workers’ self-management. In this case, it could be extended well beyond its original industrial factory setting to cover diverse areas of social life.

The Need for Welfare

All these efforts, coordinated through public investment, to stabilise and eventually help grow the economy, run up against the question of the way in which people can survive in the context of the immediate economic crisis, in addition to the long-term, egalitarian foundations on which society can be rebuilt. One of the main problems with the neoliberals—and the wider social group of traditional economists for that matter—is that, through deception or self-deception, they ignore the deep challenges involved in restructuring the welfare State on narrowly targeted grounds in the middle of a severe economic collapse. Given the administrative efforts needed to design proper mechanisms alone, it is incomprehensible that such experts would expect the State to have the capacity to rapidly transform what they themselves consider to be complex systems, such as the Samurdhi welfare programme.

Talk of cash transfers to the poor in the context of mass immiseration and hyper-inflation, then, is ideological cover for a class project to try and undermine the basis for universal or otherwise subsidised goods and services, including energy. To confront this agenda, the people’s movement must deepen its efforts to envision an alternative that reinforces the democratic ethos of Sri Lanka’s welfare institutions and rectifies persistent inequalities that exist within them. The foundational principle is that basic goods and services should be available to all, meaning free or otherwise reduced in price at the point of access. They should be funded by redistributive taxation. That could include a mix of wealth taxes, land and property taxes, capital gains taxes, or even taxes on luxury goods. The overarching point is that the provision of such goods and services should reflect the goals of social levelling, to overcome extraordinary disparities that have been further exposed in the current crisis.

The positive aspect is that Sri Lanka does have a long history of helping provision basic needs for all. But entitlements have also been weakened by regional, ethnic, caste, and gender inequalities. The goal, however, should not be to throw these entitlements out, but to engage marginalised groups in the process of democratising State structures to better ensure that everyone has what they need to survive. In the current moment that includes the urgent need for a ration system to provide food. The same logic of popular participation applies to the claim that existing public institutions are “captured” by “mafias”.

The priority should be to democratise, not privatise, including increasing public oversight and reorganising the State sector along clear, mission-driven lines (Mazzucato 2013). Over-staffing the bureaucracy, for example, is an effect of the structural condition of under-employment, which is a symptom of Sri Lanka’s dependency. The underlying problem can only be resolved through public investment and disciplining capital for the purpose of establishing industries that satisfy working people’s needs, even if that goal can never fully be realised within capitalism itself. But it certainly cannot be resolved by mass firings and retrenchment in the middle of a depression.

For the neoliberals on the other hand, they may argue that such State institutions are loss-making and cannot be maintained during a severe economic crisis. But the reality is that there is plenty of wealth that exists outside the State, in society. The primary question is the way in which it can be reappropriated for the benefit of the public. This is the perennial demand for welfare. To speak to this challenge, we must begin by grasping the need for institutions that, although on the face of it may appear to be loss-making, in fact derive their revenue by taxing the broader accumulation of wealth. The goal is to secure people’s living standards across society.

To convince the elites to part with a chunk of their wealth, however, is far from an easy task. It depends more on the radical forms of struggle that may take place either through elections or, especially if that path is further blocked, on the streets. But political economic logic also justifies the redistributive State in general. Specifically, if elites wish to live in a functioning society, and to avoid a situation in which capital accumulation is destabilised by the threat of strikes or social unrest in general, then it is incumbent upon them to accept a new social contract. As Piven and Cloward (1979) pointed out, there is always a moment in which capital comes to accept and even internalise some aspects of the new arrangement, such as the creation of social security in the US in the aftermath of the Great Depression. In contrast, the current path is a potentially disastrous wager for the elite in Sri Lanka. While the current Wickremesinghe government believes it now has the initiative with tenuous promises of financial backing from abroad and repression at home, the reality is that its plan will create social and political blowback.

The critical need is to use the current moment to take stock of the demands that can be pushed to envision a fairer society for all, even while the elites stick to the line that there is no alternative. In the current case, to an IMF agreement that is being used to ram through unpopular provisions such as privatisation, a goal anticipated in the interim budget. But having moved from planning to investment to welfare, we can see in fact the way in which the circle of entitlements can be expanded to manage shocks at the centre of the economy.

If people can achieve a society in which they have not only free education and free healthcare, but free public transport and access to public housing, for example, is this not a vision of recovery that would enable them to overcome the breakdown of the current system by mobilising toward a better future? Only by asking this and other questions will the more active and self-aware elements within the people’s movement be able to rally their forces and achieve a far more durable victory.

OPEC Plus Decision to Oil Production: Wrong in Letter and Spirit

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OPEC Plus, which is a group led by Saudi Arabia and include Russia and other oil exporters in the “Plus”  or expanded version, has now announced its decision to cut crude oil production to the extent of 2 billion barrel per day.OPEC Plus claims that such a cut in oil production is necessary, as the global crude oil price has dropped to about 90 USD per barrel from around 120 USD per barrel three months ago.

It is necessary to remind OPEC Plus countries that the price of 90 USD per barrel is not a low price and several buyers of crude oil in a number of developing countries already find it extremely difficult to pay the purchase price of 90 USD per barrel.   

The attitude of OPEC Plus countries clearly highlights their arrogance that their cartelization of crude oil production, will leave the world with no choice other than succumbing to their price pressure.

 Obviously, such a decision to cut crude oil production by OPEC Plus countries should be condemned as a reflection of the exploitative mindset of these oil-producing countries, with the least concern for the problems of the buyers and importers of crude oil. Such an approach of OPEC Plus is nothing but a crude and exploitative trading outlook, with the least sense of responsibility towards the global cause and plight of the crude oil importers.

The world economy, particularly that of the developing countries, is just slowly recovering from the negative impact of the COVID-19 crisis and there is a  real threat of a global recession happening in the next few months due to the slowing down of the global economy.  Certainly, the oil cut move of OPEC Plus countries is not good for the global economy.

It is surprising that OPEC Plus countries do not realise that when the global economy suffers, they too cannot escape from the consequences.

It is astonishing that the OPEC Plus countries have not been able to visualize that there would be consumer resistance for their exploitative method of cutting crude oil production and forcing short supply in the global market.

In August 2022, OPEC Plus countries are said to have missed their production target by 3.58 billion barrels per day, as several countries were already buying well below the existing quotas. This has been largely due to their inability to pay high prices in the global crude oil market.  In such a situation, if the global crude oil market would shrink due to consumer resistance, it would upset the economy of the OPEC-plus countries, whose major share of income has been only due to the sale of crude oil.

Already, there is a huge global campaign against the use of fossil fuels produced from crude oil and natural gas, due to global warming impact. Many countries in the world including high crude oil-consuming countries like India and China have pledged that they would target zero emissions at a specified time in the coming years.

Already, huge global efforts are seen to develop alternate fuel and feedstock such as green hydrogen, apart from a high focus on boosting the production of renewable energy such as solar and wind power. Alternative eco-friendly fuels such as algae biofuel are also receiving considerable attention by the scientific community and technology initiatives to optimize the production of biofuel are now being carried out at a feverish pace. With the growth of biotechnology and fermentation technology, new process routes are being developed to produce biochemicals that would not involve the use of petroleum feedstock. The immediate example is the efforts to produce methanol from municipal solid waste in Canada and other countries.

While curtailing crude oil consumption in a big way is a pre-condition for achieving zero emission in the world, the OPEC Plus countries are unwittingly accelerating the process of curtailing consumption of crude oil in the world by cutting down the production of crude oil that would lead to high price in the global market.  After the announcement of oil production cuts by OPEC Plus countries, the price of crude oil in the global market has already started showing an upward trend.

It is necessary that OPEC Plus countries should read the writing on the wall and reverse their decision to cut their crude oil production. Otherwise, in the long run, it would be seen that OPEC Plus countries could be the real losers.

It appears that OPEC Plus oil countries have bitten off more than what they can chew.