Author: TELO Admin

Trade unions representing the Ceylon Electricity Board (CEB), the Sri Lanka Ports Authority (SLPA), and the Ceylon Petroleum Corporation (CPC) held a massive protest in Colombo yesterday (8) against, what they claimed are, plans by the Government to sell national resources and the agreement executed with US-based New Fortress Energy Inc. on the Yugadanavi Power Plant in Kerawalapitiya.

The main demonstration of the protest was held in front of the Colombo Fort Railway Station after which they marched towards the Presidential Secretariat at Galle Face Green. There, several trade union representatives had the opportunity to hold discussions with officials of the Presidential Secretariat.

Speaking to the media after the discussion, CEB Joint Trade Union Alliance (CEBJTUA) Convenor Ranjan Jayalal said that a petition signed by employees of the CEB, the SLPA, and the CPC against the sale of national resources was handed over to the Presidential Secretariat officials.

“Senior Assistant Secretary to the President Malkanthi Rajapaksa and a group of officials had a lengthy discussion with us. They listened to us very attentively. In particular, the trade union leaders of the CPC informed them about the massive deal going on at the CPC and the SLPA trade union representatives informed the officials of the plans to sell the 13-acre land owned by the SLPA,” he said.

He further said that the officials of the Presidential Secretariat had promised to give them an opportunity to hold discussions with the President Gotabaya Rajapaksa and the Prime Minister Mahinda Rajapaksa within a period of week. Jayalal also said that he believed that the opportunity for a discussion would be given within a week and if the sale of national resources was not stopped even after that discussion, a massive trade union struggle would be launched in the future.

He said: “So far the Government has not discussed these matters with us. They have been negotiating with various other parties, but they should discuss with those who are really involved in this struggle. Therefore, we hope to have this discussion within a week. However, if the sale of national resources is not going to end even after that, we have the ability to take trade union action against the President and Prime Minister. We will definitely do that.”

The said trade unions earlier launched a series of protests on 3 November challenging the sale of national resources in front of their respective workplaces.

New Fortress Energy Inc. has said that it has signed a framework agreement with the Government to construct a new offshore LNG receiving, storage, and regasification terminal, primarily located in the Kerawalapitiya Power Complex, to supply gas to Sri Lanka’s power plants. The Central Bank of Sri Lanka (CBSL) announced on 26 October that the Government is set to receive a $ 250 million inflow from the partial divestment of the Yugadanavi Power Plant to New Fortress Energy Inc. and that the first tranche of the same is expected in November and December 2021.

India’s Defence Chief Bipin Rawat, his wife and 11 other people were killed after a military helicopter they were travelling in crashed in southern India on Wednesday, the Indian Air Force said.

It said Chief of Defence Staff Bipin Rawat, his wife were among 13 killed after an IAF chopper they were travelling in crashed near Coonoor in Tamil Nadu on Wednesday.

“With deep regret, it has now been ascertained that General Bipin Rawat, Mrs Madhulika Rawat and 11 other persons on board have died in the unfortunate accident,” the Indian Force said in a tweet.

Earlier today, Defence Minister Rajnath Singh informed Prime Minister Narendra Modi about the incident. According to sources, Singh will brief Parliament on the incident tomorrow.

Sources earlier said that at least three injured people from the crash were taken to a nearby hospital. The crash took place in the Nilgiris, shortly after the Mi-series chopper took off from the army base in Sulur.

Rawat, 63, was appointed as India’s first Chief of Defence Staff (CDS) by Prime Minister Narendra Modi’s government in late 2019.

The accident took place around noon near the town of Coonoor, and the dead include four crew members of the Mi-17V5 helicopter, the Air Force said in a tweet.

A ship loaded with 20,000 tons of fertilizer from Shandong-based producer Seawin Biotech meant for export to Sri Lanka is on its way back after failing to reach any constructive agreement with Sri Lanka, despite relentless efforts to solve the dispute, sources close to the matter told the Chinese Global Times on Tuesday.

The ship is to arrive in Singapore, where the company has launched an international arbitration procedure to settle a growing dispute over fertilizer export contract to Sri Lanka, according to the sources. The dispute, which started in early November, centers on Sri Lankan officials’ rejection of the Chinese fertilizers, citing what Chinese sources call shady claims of quality issues. Another arbitration procedure will soon take place in Colombo, Sri Lanka, which together with the contract to be arbitrated in Singapore, is totally worth $49.7 million.

New information obtained by the Global Times and interviews with sources and officials showed that Sri Lankan officials backtracked on the deals and lacked any sincerity in solving the issues, even after the Chinese company sought third-party certificates to prove the quality of its products, which resulted in the launching by the company of the arbitration procedure in Singapore.

“A notice of arbitration has been issued to Sri Lanka about the international arbitration in Singapore, and the arbitration procedure has been initiated,” a source close to the company told the Global Times on Tuesday.

In a statement to the Global Times, the company stated that the bidding involving the dispute over imported fertilizer from China was dubious and shady, and it involved breaking business rules and hiding the truth from the public.

The Economic and Commercial Office of the Chinese Embassy in Sri Lanka said in a statement to the Global Times on Tuesday that it attached great importance to this trade dispute, given that Sri Lanka’s imports of organic fertilizers this time are a government procurement project, and the amount is relatively large.

“The Sri Lankan Ministry of Agriculture has backtracked and has no sincerity in solving the problem, therefore, enterprises can only use judicial and arbitration channels,” the Embassy said, extending its hope that the matter can be resolved satisfactorily as soon as possible.

Despite the embassy’s joint efforts to promote the settlement of the dispute by guiding and assisting enterprises to deal with the issue, as well as communicating and coordinating with the senior levels of the government of Sri Lanka, including the Ministry of Trade, the Ministry of Agriculture and other relevant departments, the issue remains unsolved, according to the embassy.

The Sri Lankan Embassy in China did not respond to the Global Times request for comment as of press time on Tuesday.

Sri Lanka barred the Chinese ship carrying desperately needed organic fertilizer, saying that “harmful bacteria – Erwinia” had been found in the batch, according to media reports.

But in the statement, Seawin Biotech strongly denied. In response to the allegation, the Shandong-based company has been very cooperative with the Sri Lankan side, including sending the same batch of samples to the China Customs Testing Center and the internationally renowned Swiss third-party testing institute SGS for retesting.

The China National Plant Quarantine Service investigated Seawin’s products according to the International Plant Protection Convention agreement, and it confirmed that the products do not contain Erwinia, according to the company.

According to the bidding documents and the contract, the product quality shall be tested and confirmed by a third-party testing institute designated by the Sri Lanka Standards Institute (SLSI) before sailing.

SLSI appointed the German testing institute Schutter Group. Schutter audited Seawin’s production line and took samples from the production line and warehouse.

Although the products did not contain Salmonella and Coliform when they were tested, the test report of the National Plant Quarantine Service of Sri Lanka still claimed that Erwinia was found in the product, according to Seawin Biotech.

Moreover, several meetings were held under the active coordination of the Chinese company and the Chinese Embassy in Sri Lanka in a cooperative and dispute-solving manner with the Sri Lankan side, but no substantive progress was made.

In bidding for the fertilizer import, the People’s Bank of Sri Lanka issued an irrevocable letter of credit to Seawin, the Shandong company said, indicating the irrational move by the bank has made the situation difficult.

Seawin Biotech suggested several conditions, such as having the Sri Lankan side pay 70 percent of the claim, alongside Seawin Biotech’s demand for the Sri Lankan agriculture ministry to issue a statement that the shipment was rejected because of an import permit dispute and not because of the quality of the fertilizer. But none of the conditions have been met by the Sri Lankan side so far.

“Because no discussed conditions have been met, we decided to take our ship back from Sri Lanka and head to Singapore for a lawsuit,” the person with the Shandong company told the Global Times on Tuesday.

Chinese Foreign Ministry Spokesperson Wang Wenbin also commented to the media over the issue previously.

“China attaches great importance to the quality of exports…the fertilizer concerned had passed tests of third-party agencies assigned by the Sri Lankan side before shipping,” Chinese Foreign Ministry spokesperson Wang Wenbin said on November 2.

Sri Lanka’s economy is dominated by agriculture. Of its approximately 22 million people, more than 70 percent depend directly or indirectly on agriculture, according to media reports.

According to Deutsche Presse-Agentur, the Sri Lankan government previously promised to provide farmers with organic fertilizers and other chemical fertilizer substitutes, but it failed to materialize.

Due to insufficient fertilizers and pesticides, large tracts of farmland in Sri Lanka were left unused.

China is a big fertilizer consumer, but at the same time it is also exporting a large amount of fertilizer to the main grain-producing areas of the world, including regional countries such as India.

Industry insiders fear that the recent trade dispute with the Chinese company is setting a very bad example for Sri Lanka’s future trade with China, not just in terms of fertilizers but beyond.

No decision has been taken to grant the Northern energy project to an Indian company, Co-cabinet spokesman – minister Ramesh Pathirana stated.

He was responding to a query raised at the Cabinet briefing this morning (07), asking whether the project was granted to the Adani Group of India.

Earlier, Opposition MP – Patali Champika Ranawaka had alleged that the government is planning to hand over three northern islands of the country to India’s Adani Group to construct a 500MW Wind and Solar energy plant.

Meanwhile, the the Chinese embassy in Sri Lanka had tweeted last week that the Sino Soar Hybrid Technology, being suspended to build Hybrid Energy system in 3 northern islands due to ‘security concern’ from a third party, has inked a contract with Maldivian gov’t on 29 Nov to establish solar power plants at 12 islands in the Maldives.

China and Sri Lanka today (07) have signed an aid agreement about Rs. 8 billion on comprehensive refurbishment of the Supreme Courts Complex.

The SC Complex, built in 1989 with China Aid, has been playing a central role in the island’s judiciary for more than 32 years.

The signing event was presided by the Chinese ambassador in Sri Lanka – Qi Zhenhong and the minister of Justice – Ali Sabry.

Sri Lanka has just been knocked by a tuk-tuk, hit by a bus, and is being dragged along the road. The country is dangerously low on foreign reserves, struggling to pay creditors, facing import restrictions leading to shortages, and seen overnight price hikes on essentials. Though exacerbated by COVID, the underlying conditions for the crisis have been in the making for years. The Government of Sri Lanka (GOSL) may dislike the International Monetary Fund’s (IMF) programs, but if Sri Lanka is to ever pull itself out of its current quagmire it needs the IMF.

Central Bank Governor Nivard Cabraal and MP Vasudeva Nanayakkara vehemently oppose the program because of the conditions the IMF imposes on the country. “Even if we die, we will not seek assistance from the IMF,” Vasudeva told Parliament in November. Instead of dismissing IMF assistance, Vasudeva and other officials should view it as physical therapy that will enable Sri Lanka to start walking on its own two feet again.

Sri Lanka’s situation is dire. The country, unfortunately, checks all boxes on the IMF’s list of why crises may occur. Inappropriate fiscal and monetary policies? Check. An exchange rate fixed at an inappropriate level? Check. A weak financial system? Check. Political instability and/or weak institutions? Check. A natural disaster or an external shock? Check, we have that too, with COVID still prevalent. Bingo!

The IMF states that crises usually result in sharp slowdowns in growth, higher unemployment, lower incomes, and greater uncertainty in countries that can lead to deep recessions. These outcomes are inevitable unless Sri Lanka has someone to help exercise it back to health.

So why does the Government shun the IMF? Resorting instead to taking two Panadols, sleeping and hoping to magically walk again painlessly in the morning, without ever addressing the underlying issues. One reason is the short-term no conditions attached loans Sri Lanka receives to plaster over its wounds: loans from India; China; an IMF distribution of pandemic assistance; and, a currency swap with Bangladesh—considered one of the UN’s Least Developed Countries but now coming to Sri Lanka’s rescue.

As the lender of last resort, the IMF will provide Sri Lanka with financial support to restore economic stability, while ensuring it does not fall into a debt spiral. The IMF will design a loan program, aimed at fixing structural issues, in collaboration with the Government. And just as a physio rehabilitates with painful exercises, the IMF program conditions will get Sri Lanka walking again, even if the exercises will be painful in the short-term.

Tax revenues will need to be increased to improve the fiscal position and operational capacity of GOSL. A painful exercise going against public sentiment, but easier to stomach when conditionality also improves accountability. The 2016 IMF program included having the ministry update its tax administration system; publish tax expenditure statements as part of the budget; and increasing tax collection by simplifying the tax code, auditing dodgers, and broadening the tax base. Sri Lanka ranks among Somalia, Yemen, Bangladesh, and Ethiopia in the top 10 least tax-collecting countries. Currently, Sri Lanka’s tax revenue is 9.5% of GDP, down from ~20% in the 1990s, while studies estimate that 13% is needed for a state to effectively carryout its duties.

The next painful exercises will be improved public financial management and governance and accountability of state-owned enterprises. The Ceylon Electricity Board and SriLankan Airlines are among the State’s loss-making entities that are not commercially viable. This leads to GOSL constantly bailing them out while increasing its exposure to the foreign loan market.

Just as Vasudeva fears, the IMF will also ask for a devaluation of the rupee as part of its rehab program, which could lead to an increase in prices over time. The MP, however, discounts the upsides of devaluation: It improves export competitiveness, narrows the trade deficit, and can reduce the cost of some interest payments. As Sri Lanka’s international reserves rapidly declined from $ 8 billion to $ 2 billion since 2020—the lowest level recorded ever—GOSL will need to stop propping up the rupee.

Yes, Cabraal and GOSL, IMF conditionality is difficult, and it certainly is a painful rehabilitation process. While encouraging fiscal discipline and structural adjustments is the primary tenet of the program, an IMF program is more than just money to shore up short-term crises. The IMF can provide a comprehensive assessment on Sri Lanka’s fiscal, monetary, and governance reforms. It can monitor its performance indicators. And a successful completion of the program will reduce Sri Lanka’s borrowing rates and attract creditors once again.

A condition-based program with the IMF, the hated physio, is crucial if Sri Lanka is to stand up on its own two feet again; delays in accepting this truth will only lead to exacerbating the crisis and prolonging the suffering.

(The writer is finishing up his Master’s program at the Harvard Kennedy School and previously worked at the IMF for four

years working on program

negotiations with developing countries.)