The Sunday Times FT - Lanka proposes new Commonwealth Fund for urban poor

Reporting by Duruthu Edirimuni and Natasha Gunaratne and pictures by J. Weerasekera

President Mahinda Rajapaksa said last week that he was proposing the establishment of a Commonwealth Fund to address human settlement issues of the urban poor.

Speaking at a glittering opening ceremony of the 60th Commonwealth Finance Ministers’ conference in Colombo, the president noted that agriculture is the backbone for many developing countries and the main source of income generation in the rural economy. Any agenda for development and growth must focus on the agricultural sector.

The opening event was attended by the country's business and diplomatic elite in a glittering ceremony held at the Cinnamon Grand Hotel. Students were recruited from all over the island to carry in the flags of the 53 Commonwealth member nations.

President Rajapaksa also spoke about the need for public investment in the rural sector in order to develop its infrastructure. "In Sri Lanka's current development strategy, therefore, we have launched a programme of action to speed up the process of rural economic growth in our country," he said.

The president said Sri Lanka is proud to be members of an organization that upholds the principles of the Commonwealth and tries to promote democracy and good governance, human rights, the rule of law, gender equality, and sustainable economic and social development." “The escalation of oil prices is a central issue of focus at this year’s meeting as well as the large economic imbalances among major countries in the world. The failure to stabilize increasing interest rates and the need to ensure adequate and reliable resource flows to developing countries to ensure sustainable economic growth and help achieve the Millennium Development Goals are of importance as well,” he said while referring to the threat of terrorism. "In this regard, peace and security is of paramount importance and as the world is united on the need to combat terrorism, I reiterate my call to the LTTE to renounce terrorism and enter into negotiations to promote peace and development for the benefit of all our citizens," the President said.

Public Administration and Home Affairs Minister Sarath Amunugama, who is also the de-facto Finance Minister, said Sri Lanka is honored that the Commonwealth chose this country to promote sustainable development and growth and that the nation is committed to making positive change with lasting peace, social prosperity and greater harmony as envisioned by the Mahinda Chintanaya. Commonwealth Secretary General, Don McKinnon, who gave the opening address said, "So often, politicians are criticized for taking decisions with an eye only to the short term. But even if our decisions could be short term in their scope and impact, we were always conscious of the long term." In this regard, he hoped that the meeting will have the potential to change people's lives fundamentally.

McKinnon said there has been some progress on debt relief, one of the meeting’s central themes, including the Multilateral Debt Relief Initiative. He expressed concern in regard to donors' debt reduction payments being claimed as part of their aid flows when they should be additional to them.

He also said that the picture on aid is not favourable. "Although the headline aid figures for 2005 will show a sharp rise, this is due to the exceptional amounts of debt relief for a few countries. The underlying trend is falling well short of what is needed to meet the Gleneagles pledge."

McKinnon added that one of the biggest disappointments in trade has been the suspension of the Doha Round. He warned that there is a serious risk of unraveling global trade agreements, with a proliferation of bilateral and regional deals that we can be sure will not be to the advantage of the poorest or smallest. The Secretary General concluded his remarks by saying, "We, your Commonwealth brothers and sisters, hope the peace process will be put firmly back on track and issues resolved without further violence so that this country of great promise (Sri Lanka), can realize its full potential. We are prepared to do whatever we can to assist in that process."

Sri Lanka has refused the Highly Indebted Poor Country (HIPC) status amongst Commonwealth nations saying that since her debt repaying record is extremely good, such classification is unnecessary.

“We felt that such a classification is unnecessary,” Sarath Amunugama, Minister Public Administration, told the media at the conclusion of the 10th Commonwealth Finance Ministers’ Conference.

Bangladesh, Sri Lanka and Tonga, were either not qualifying or declined HIPC status, and their current membership of CHMF (Commonwealth HIPC Ministerial Forum) would remain. At the HIPC Ministerial Forum last Tuesday in Colombo, the Finance Ministers from Gambia, Cameroon, Ghana, Malawi, Mozambique, Sierra Leone, United Republic of Tanzania, Uganda and Zambia together with representatives from Australia, Britain, Canada and New Zealand reviewed developments and the progress made on their recommendations since the Livingstone Meeting.

Ministers reiterated that, for reasons of equity, the scope of the Multilateral Debt Relief Initiative (MDRI) be widened to include all IDA-only countries (including those which do not qualify for HIPC relief because their indebtedness ratios are below the HIPC thresholds).They again stressed the need for comprehensive solutions to the debt problems of countries other than IDA only, especially highly indebted small states, which face special challenges.

Ministers welcomed the implementation of the MDRI relief by both the IMF noting that relief had now been approved for all 20 Completion Point HIPCs (including Mauritania which was initially excluded). They also hoped that, following a satisfactory macroeconomic programme and PRSP implementation, all other decision point countries, including the Gambia, would reach their completion points as soon as possible.

While reiterating their concern about the domestic debt burden, they repeated their call on the Commonwealth to play a leading role in the advocacy for comprehensive approach to address both domestic and foreign debt.

Restating their disquiet with International Development Association (IDA) shifting the cut off date of eligible debts from end-2004 to end-2003 and choosing the implementation date of July 2006 which had resulted in a significant loss of debt relief for IPCs, Ministers underlined the importance of consistency between institutions and called on the IDA to re-consider its stand and on donors to provide adequate funding to IDA to do so.

Commonwealth Finance Ministers last week reviewed the world economic situation and discussed a range of development and other issues including the “Agenda for Growth and Livelihoods’ at the Colombo parley.

Special problems affecting small states and their need for support and promoting investment in Commonwealth developing countries together with issues that are on the agenda of the Annual Meetings of the World Bank and International Monetary Fund (IMF) in Singapore were also discussed.

Ministers urged key players in the Doha negotiations to provide the political impetus needed to revive the negotiations and bring them to an ambitious, comprehensive, successful and development-oriented conclusion. Any breakdown in negotiations would have adverse consequences for all countries, especially the poorest and most vulnerable.

They called for stronger policy efforts by individual countries including tighter fiscal policy in the United States, continued structural reform in Europe, increased domestic demand in Asia and oil-exporting countries, and increased exchange rate flexibility in Asia.

On the special theme - An Agenda for Growth and Livelihoods - the Ministers’ focused on what constitutes the best policy agenda for countries to follow as they seek to enhance growth and improve livelihoods of their populations.

According to a conference statement, Ministers agreed, in particular, that increasing access to financial services is a priority.

They recognised the importance of governments to work in partnership with the private sector in expanding access to financial services.

The Commonwealth HIPCs will also seek a new terminology to categorise the countries concerned, given the negative connotation associated with the current terminology.

The ministers’ noted the importance of linking medium term strategies firmly to annual budgets, with Finance Ministries playing a key role in ensuring consistency and the need to explain national strategies to the general population , while engaging parliaments. They also discussed the advantages of budget support as the most effective and useful form of donor funding, or where that cannot be achieved, the advantages of “sector basket” funding.

The Commonwealth–Sri Lanka Investment Roundtable in Colombo last week saw the government hierarchy taking on the role of aggressive promoters and called on the Commonwealth countries to invest here while taking advantage of the concessions.

Enterprise Development and Investment Promotion Minister Rohitha Bogollagama said that the country is on a drive to uplift the country’s economy from its traditional, conventional approach to that of a socially conscious and vibrant one. “We managed to bring in US$ 240 million of foreign direct investment during the first six months into power,” he said, adding that the current economic plan is the best that the country has seen so far.

Central Bank Governor Nivard Cabraal showed some impressive figures on investment in Sri Lanka during the first half of the year to the Commonwealth delegates and said that Sri Lanka is a ‘good place to come and work’ and ‘its business as usual’. “We have posted a commendable growth with 7.9 percent during the first half of the year and are poised for a seven percent growth in 2006,” he said.

He said that public investment increased to 6.3 percent of Gross Domestic Product in 2005. “The revised target for 2006 is seven percent,” he said. He pointed out that the International Monetary Fund recently concluded its Article IV surveillance report on Sri Lanka praising its economic growth, sound macroeconomic management, and the resilience of the economy to various internal and external shocks. “All assets in the country are now available at a discounted price and notwithstanding the concerns, the economy is growing and its business as usual,” he said.

He added that with rapid improvements in infrastructure, the country will be able to upgrade its assets and those assets will command higher prices in the future. “Substantial dividends await those who will join today to develop Sri Lanka’s economy,” he said.

Chief Secretary to the Treasury, UK and Member of Parliament Stephen Timms who made the keynote address said that he is impressed by the ‘resilience’ of the Sri Lankan economy and its people amidst a host of challenges. “We welcome an affirmation of a ceasefire in the country,” he said, adding that peace is of paramount importance.

He observed that in terms of development in progress, there was huge support for village economies; the construction of the Southern highway project which was pointed out as a key project that is apt to make a huge difference in terms of infrastructure facilities.

Cabraal noted the expressed concerns of the private sector in terms of energy as a result of which he observed there would be huge insurance on this with the upcoming Kotmale hydropower plant and the Norochcholai coal power plant.

Commenting upon the security concerns he noted this was ever-present all over the world and that “Sri Lanka is still open for business.” The situation in Sri Lanka he pointed out was not much different than it was in other countries. However, he observed that there were plenty of dividends for investors. Board of Investment (BOI) Chairman Prof. Lakshman R. Watawala addressing the roundtable conference gave a descriptive insight on investment opportunities in Sri Lanka, and emphasised areas of potential opportunities in the country.

“There are excellent opportunities for universities to set up campuses here for higher education with a large number of students passing out but only a few able to enter the local universities,” he said, adding that there are a host of opportunities in the tourism sector as well.