When a drunk walks out of a bar, he moves in a this-way-that-way manner. Finally when he appears to be able to maintain a steady, straight-line walking pace, he suddenly sways again before getting back! This is how a Sri Lankan (non political) economist described the current path of the Sri Lankan economy. “On one [...]

The Sundaytimes Sri Lanka

SL’s ‘this-way, that-way’ growth


When a drunk walks out of a bar, he moves in a this-way-that-way manner. Finally when he appears to be able to maintain a steady, straight-line walking pace, he suddenly sways again before getting back!

This is how a Sri Lankan (non political) economist described the current path of the Sri Lankan economy. “On one side we say there is growth but on the other hand there are no public reforms; in fact the size of the public sector has doubled (in the numbers employed). All this extra expenditure is added as GDP growth. There is little discussion on revenue and FDI versus growth.”

Describing the economy like an ‘octopus’, the economist also argues that reforms, reducing the public sector, a good law and order situation, and a condusive environment for investment among other fundamentals are all measures that must be considered in GDP growth.

This analysis is interesting in the context of this week’s developments that grabbed newspaper headlines. Consider these events – all of which would, one way or the other, fall into the category enunciated earlier:

n Formation of a new police unit to tackle religious issues

n The Bodu Bala Sena storming a government office with police looking on helplessly. Isn’t this a criminal offence or will it go to the ‘religious police’ for ‘samadana (mediation)?

n Government politicians waving real revolvers and claiming they are toy pistols. If an opposition politician was caught on camera doing the same, he or she would be in jail by now. Such is the law and order situation in the country.

n British tourist who says she is a Buddhist deported for having a tattoo of the Buddha on her shoulder. Aren’t tattoos meant either for fun or to express a feeling – in this case, her Buddhist leanings? Shouldn’t she have been gently and diplomatically warned about cultural sensibilities and allowed to proceed on her holiday, at a time when Sri Lanka is trying to attract as many travellers as possible?
n Both the UK and Australia have updated travel warnings which are negative to the country

n The scare over ‘losses’ in EPF investments in stock market-listed companies since 2011

n A Ceylon Chamber of Commerce-connected association cancelling a meeting, in which outspoken Opposition MP Harsha de Silva was billed to speak, as there were just a ‘few registrations’! Now will it be held on another day? Harsha says the meeting was cancelled due to pressure from the government while the organizers deny this was the reason. The event was to take place a day before a protest by the opposition against the ‘casino’ bill. Readers make your own guess as to the actual reason of the cancellation!

n Elderly persons who have invested hard-earned money in now-collapsed finance companies dying as they are unable to pay their hospital bills (see story in previous page)

The EPF or Employees Provident Fund is the only saving for private sector employees on their retirement and thus, rightly so – as overwhelmingly pointed out in a Business Times (BT) poll this week -, they must know what is happening in the Fund and where they money is being invested, etc.

Sister paper, the Daily Mirror’s exclusive report on the Auditor General (AG)’s review of the 2011 EPF report shows that the value of investments made in 56 companies as at December 2011 had reduced in value by Rs. 11.7 billion according to their share prices as of January 2013.

With the media and Harsha de Silva ‘going to town’ with this revelation, the Central Bank responded with a statement listing figures of ‘profits’ and gains for members between 2009 and 2013/14.

The Bank argued that what was reflected in the AG’s/media reports was ‘unrealised’ losses and not ‘realised’ losses. To the layperson it means, that if these shares were sold at January 2013 prices levels, the loss would have been as stated in the AG’s review. It was pointed out that share prices fluctuate and while the prices could remain (at January 2013 or lower levels) it could also rise to the 2011 levels or even further. On the flip side, the price levels could sink further and holding on to such stocks would not be sound investment advice. Then what happens?

The Fund’s investments in the stock market has drawn a lot of attention in recent years after purchases in not too well-known companies and also banks, triggered accusations that these investments were motivated by certain interests and for state control of private banks. As of now, Hatton National Bank is chaired by a retired central banker while the Commercial Bank will soon see (in June) another retired central banker in the hot seat when Dinesh Weerakkody exits. Sampath Bank is chaired by pro-government businessman Dhammika Perera who is also a Ministry Secretary.

There were clear messages to the government from the BT poll, which drew a huge response from the public, academics and business leaders: Investments in the stock market should be in good companies and that there should be more transparency about these investments. The Government needs to take these polls seriously as it reflects the views of the people and comments made are in good faith and for the country’s and the people’s benefit.

The EPF has been a bone of contention in recent years pertaining to maximizing its funds to benefit members. The stock market is seen as an investment option to bring greater returns as long as the investment decisions are professional and not guided by ther considerations.

The Government is also planning to transform the EPF and ETF into a pension fund after an abortive attempt in 2011 to transfer some of that money to a separate pension fund for private sector employees, which led to a worker being shot dead in police fire (during a protest). The authorities made a hash of that attempt and the same is happening in the case of the ‘casino’ bills.

Proper consultation with the private sector, workers and unions and their views sought on the proposed pension scheme is absolutely necessary in these proposed amendments to the EPF and ETF Acts before any final decisions are made.

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