'Co-Chairs kept mum after Rajapaksa acknowledged shelling safe zone' : Wikileaks

JDS Features
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Even as Sri Lanka is waging a diplomatic and propaganda war to-date to conceal the concerted shelling by the military into the no-fire-zone and systematic killing thousands of Tamil civilians during the final months of the war, Presidential sibling and top Minister Basil Rajapaksa has ‘acknowledged’ to the members of the donor Co-Chairs that its military was, in fact, carrying out shelling into the safe zone, a latest release of the Wikileaks cable has revealed.

“The Norwegian Ambassador commented that in two recent meetings with Rajapkasa he acknowledged military forces were shelling into the safe zone, but was not comfortable discussing the subject,” the Wikileaks cable has quoted the then US Ambassador to Sri Lanka, Robert O. Blake, as stating in a diplomatic note to his immediate superiors in the US on the Co-Chairs meeting in Colombo on 5 March, 2009. Mr.Blake is now serving as the Assistant Secretary of State for South and Central Asian Affairs.

"Defensive shelling"

“Rajapaksa was not as forthcoming to the Ambassador’s concerns about credible reports of shelling of the safe zone on several successive days recently. Rajapaksa lamely pointed out that GSL forces had come under fire from LTTE artillery within the safe zone and they had to defend themselves,” it said.

“Ambassador pointed out such retaliatory shelling had killed many civilians and was a reversal of the government's own commitment not to use heavy weapons,” the Wikileaks has quoted Ambasssor Blake who has hosted the Co-Chiar meeting as stating in his diplomatic note.

Knowing credibly well that the Sri Lankan government troops were carrying out long range artillery barrage into the no-fire-zone which was created by the government itself, and thousands of Tamil civilians were getting killed and maimed daily, the members of the Co-Chairs, such as the US, Japan, Norway and the European Union, decided not to issue even a strong statement highlighting and condemning the acts of serious war-crime that was taking place just few hundred kilometres away from where they were meeting.

Agreed to stay mum

“Ambassador (Blake) hosted a meeting of Co-Chair Ambassadors on March 5 to take stock of actions since the February 3 Co-Chair statement and consider what further actions we should recommend to capitals. Ambassadors agreed not to recommend an additional Co-Chair statement at this time since the GSL is responding to some, but not all, our concerns,” the Wikileaks cable has quoted Ambassador Blake as saying in his diplomatic note to Washington.

“We further agreed to recommend that Ambassadors from countries with significant Tamil Diaspora communities meet to coordinate messaging to the Tamil Diaspora to, among other things to bring additional pressure to bear on the LTTE to release the civilians trapped in the north,” Blake, however, has said.

Japan & Norway

According to the Wikileaks cable, although the EU has argued that capitals should issue a strong, coordinated statement “to express our strong concern about the potential humanitarian ‘catastrophe’, the Japanese and Norwegian Ambassadors “argued that the government was making an effort to respond to most of our humanitarian concerns with the exception of its recent shelling of the safe zone”.

“They argued that a critical public statement now might set back Basil's efforts to provide more food. Ambassadors agreed to continue to individually deliver strong messages directly to the government on the major humanitarian concerns. Ambassadors agreed we should defer consideration of a joint statement until the middle of next week to gauge GSL sincerity in delivering food supplies,” Ambassador Blake has been quoted as saying his note.

What the Wikileaks cable has clearly revealed was the fact that if the government of Sri Lanka and its security forces have committed serious war crimes and crimes against humanity, the powerful members of the international community, have virtually aided and abetted such actions in the island nation by all means.

© JDS

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Galle Dialogue 2011: Maritime Conference to begin in the Port City of Galle

Sri Lanka Navy
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On the directive of the Ministry of Defence, the “Galle Dialogue 2011” maritime conference will be organized by the Sri Lanka Navy and be held in the port city of Galle on 14th and 15th November 2011 with local and foreign participation from the maritime fraternity.

The “Galle Dialogue” initiative of the previous year created a forum to discuss and exchange matters of regional maritime security concerns. The Dialogue this year will aim to continue the discussion with the experiences of events over the past 15 months. The theme for “Galle Dialogue 2011” will be “Challenges and Strategic Cooperation for Indian Ocean Maritime Concerns”.

An initial meeting to organize the conference chaired by the Commander of the Sri Lanka Navy Vice Admiral Somathilake Dissanayake was held at the boardroom of the Navy Headquarters in Colombo on 29th August 2011. The proceedings of the Galle Dialogue 2011 were officially released to the conference web site www.galledialogue.com by the Commander of the Navy.

The conference will be attended by over twenty-five countries where the participants are expected to discuss on a broad spectrum of maritime issues.

© Navy.lk

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Lapses in lifting of Emergency

By Political Editor | The Sunday Times
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A five-year long state of emergency, which saw the military defeat of Tiger guerrillas, ended midnight Tuesday closing a historic and sometimes controversial chapter in the country's history. However, another began at the same time heralding a new era where new laws replaced key provisions that were rescinded. In reality, most provisions in force under a state of emergency continue to remain under different laws.

One such provision, easily the most visible, is the deployment of troops - Army, Navy and Air Force - with full powers, like the Police, to conduct searches and arrests. In the case of the Army and Air Force, it will apply to those above the rank of Sergeants and in the Navy for those above Petty Officers. Under normal laws, such powers are conferred only on the Police. In the light of this, military checkpoints that are now positioned in parts of the city and principal towns will continue to remain. So will the practice of setting up impromptu checkpoints in the City of Colombo.

Despite the lapse of the state of emergency, the deployment of troops has been made possible by an Order by President Mahinda Rajapaksa printed in a Gazette Extraordinary dated August 6. It states "By virtue of the powers vested in me by Section 12 of the Public Security Ordinance (Chapter 40), I Mahinda Rajapaksa, do by this order call out all the members of the Armed Forces specified in the First Schedule hereto, for the maintenance of public order in the areas specified in the Second Schedule hereto." A Defence Ministry official who spoke on grounds of anonymity said that this Order will remain in force "until rescinded" and does not require a state of emergency to be valid.

According to Rajapaksa's order (First Schedule), the deployment of troops will apply to all the 25 districts in the country. They are Colombo, Gampaha, Kalutara, Kandy, Matale, Nuwara Eliya, Galle, Matara, Hambantota, Jaffna (and the territorial waters adjacent to such District), Killinochchi, Mannar (and the territorial waters adjacent to such District), Vavuniya, Mullaitivu (and the territorial waters adjacent to such District), Batticaloa (and the territorial waters adjacent to such District), Ampara (and the territorial waters adjacent to such District), Trincomalee (and the territorial waters adjacent to such District), Kurunegala, Puttalam (and the territorial waters adjacent to such District), Anuradhapura, Polonnaruwa, Badulla, Moneragala, Ratnapura and Kegalle.

Armed Forces mainten public order

Rajapaksa's Order, just two days before Parliament for the last time approved his proclamation to extend the state of emergency until August 30, was made under the Public Security Ordinance Part III that deals with special powers of the President. The section dealing with 'Calling out the armed forces' (12 (1)) states "Where circumstances endangering the public security in any area have arisen or are imminent and the President is of the opinion that the police are inadequate to deal with such situation in that area, he may, by Order published in the Gazette, call out all or any of the members of all or any of the armed forces for the maintenance of public order in that area."

This order also confers other powers on the President. An example: Where the President considers it necessary in the public interest to do so for the maintenance of any service which, in his opinion, is essential to the life of the community, he may, by Order published in the Gazette, declare that service to be an essential service. This provision is aimed at dealing with any strikes or other forms of trade union action that may affect the working of public utilities or other services by declaring them as an "essential service." Where any service is declared by Order made to be an essential service:

(a) any person who, on the day immediately preceding the date of publication of that Order in the Gazette, was engaged or employed, or who, after that day, is engaged or employed, on any work in connexion with that service shall be guilty of an offence if he fails or refuses to attend at his place of work or employment or at such other place as may from time to time be designated by his employer or a person acting under his or her authority of his employer.

(b) Any person who, by violence to person or property, or by spoken or written threat, intimidation or insult of any kind to whomsoever addressed or by molestation of any description, or in any other manner whatsoever-

(i) Impedes, obstructs, delays or restricts the carrying on of that service, or
(ii) Compels, incites, induces or encourages any other person employed in or in connexion with the carrying on of that service to surrender or depart from his employment or
(iii) Prevents any other persons from offering or accepting employment in or in connexion with the carrying on of that service; or

(c) Any persons who, by any physical act or by any speech or writing, incites, induces or encourages any other person to commit any act shall be guilty of an offence.

In his unscheduled announcement to Parliament on August 25, President Rajapaksa said, "From the time terrorist activities ended in May 2009 until today there have been no reports of any terrorist activities, other than the imaginary "Grease Demon." During this period, through the conduct of several elections, the country moved further towards democracy. Society has accepted that these were peaceful and fair elections. Therefore in the recent past we have been removing various clauses of the Emergency Regulations and steadily bringing society to normal administration………..I would like to present to this august assembly, the proposal to do away with the Emergency Regulations for administrative activities to function democratically under the ordinary law. This is because I am satisfied there is no longer a need for extending the Emergency Regulations for the administration of the country now. Therefore I propose not to extend the Emergency Regulations."

The reasons for the countrywide deployment of troops, as explained in provisions of the special powers conferred on the President under Public Security Ordinance III, are for "circumstances endangering public security." However, the government has not explained what incidents have endangered public security warranting a countrywide deployment of troops. Nor has the country's main opposition, the United National Party (UNP), thought it fit to raise issue other than for some cursory remarks by one of its MPs, Dr. Jayalath Jayawardena. More so when the UNP is campaigning steadfastly for the October 8 polls to 23 local councils.

However, in the past several weeks, security forces have supplemented the Police in some areas to counter incidents arising from the mythical "Grease Demon" phenomenon. This is essentially a law and order problem and has raised the concerns of both serving and retired senior police officers over what they fear is a deterioration of policing standards. In most instances, the customary dialogue by Officers-in-charge of police stations with the clergy, senior citizens, leading businessmen, professionals, civil society organisations among others in their respective areas of control has broken down.

Replacing them has been politicians in the area to whom the officers are mostly obliged for their promotions and transfers. The erosion of public confidence, particularly of those who have no political connections, has forced some to become a law unto themselves as is evident during recent incidents. Troops who are understandably not trained in community-based policing like the Police, it has been found, exacerbated the situation. Needless to say that the recent incidents have created a widening chasm in relations between the public and uniformed cadres. This has taken a different turn in the east where the military has begun registering youth. They have been summoned to camps to provide their personal data.

The deployment of troops after the lapse of the emergency formed the subject of discussion at this week's politburo meeting of the Janatha Vimukthi Peramuna (JVP). Later, the party's Gampaha district parliamentarian, Vijitha Herath told the Sunday Times, "The announcement of lifting of the Emergency Regulations is a case of deceiving the public. Though the government claims the regulations have been removed, the same regulations have been introduced in a different way. Though an announcement has been made, none of the persons arrested on suspicion for terrorist activities has been released, the High Security Zones have not been withdrawn and Army checkpoints in the north remain the same. Therefore it has not brought any benefit to the public.

Four more regulations

"We have been told that four more regulations are to be introduced to replace provisions repealed in the now defunct Emergency regulations, but they have not been made public as yet. This leaves a question about those who have been detained under the Emergency Regulations. We are also opposed to any new provisions being brought in Parliament as it amounts to the same issue of suppressing the rights of the people. The Prevention of Terrorism Act too is a dangerous provision and that too should be removed. This is a clear case of misleading the public as well as the international community".

Contrary to Herath's claims, there were no plans by the government to either release Tiger guerrilla suspects now awaiting trial or dismantle the High Security Zones, particularly those in the north. The guerrilla suspects were taken into custody and the High Security Zones came into being under the lapsed emergency regulations. In addition to these two aspects, the office of the Commissioner General of Rehabilitation was also created under the emergency. Outgoing Attorney General Mohan Peiris this week confirmed the exclusive revelations in the Sunday Times that new regulations will be promulgated under the Prevention of Terrorism Act to give effect to these matters as well as some other provisions. These new regulations, a high ranking government source claimed yesterday, were promulgated dated August 30. "The President had signed the order. It was thereafter sent by then Attorney General Mohan Peiris to the Government Printer," the source claimed. Officials were busy yesterday trying to ascertain where the delay had occurred.

However, in a strange development, no copies of the Gazette notification, a public document, have been released. The worst affected by this vacuum, despite claims that the Gazette has been printed, are the state agencies like the Criminal Investigation Department (CID) and the Terrorism Investigation Division (TID) under whose purview those suspected of guerrilla activity are being held, until last Tuesday midnight under the emergency regulations. Another issue concerns the rehabilitation programmes currently carried out by the Commissioner General of Rehabilitation on one time guerrilla suspects. With the end of the emergency, both the Commissioner General and the suspects are free.

Lawyers representing those detained have sought formal clarification on the grounds under which their clients are being held since the emergency has lapsed. These agencies have not been able to explain except to say that the required regulations have been gazetted under the PTA. However, they have not been able to produce printed copies. If indeed the Gazette has been printed, why it has not been released has raised serious concerns. Here again, the main opposition UNP has remained silent. The issue of this unexplained silence has already been raised by the Tamil National Alliance (TNA) and the JVP. Unlike in the past years, the Government Printer has remained slow in providing Gazette notifications to either paid subscribers or to the Government Publications Bureau. On Friday, the Chief Government Printer, Lakshman Perera, avoided calls from media inquiring about the Gazette notification. A secretary who answered the telephone said he was not available for comment.

This PTA (Section 27 (1)) empowers the Minister of Defence to make regulations for "the purpose of carrying out or giving effect to the principles and provisions" of this Act. It requires that such regulations be published in the Gazette. Though no time limit is fixed, the PTA requires that such regulations, once Gazetted, be placed before Parliament for approval.

© The Sunday Times

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Illegal clearing of forests by 'Dole Lanka'

By Nirmala Kannangara | The Sunday Leader
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Questions have been raised as to whose forceful hand is behind Dole Lanka (Pvt) Ltd, the local partner of USA based Dole Food Company, that has cleared more than 15, 600 forest lands in the country for banana cultivation in the Somawathiya National Park, Lunugamvehera National Park and in Buttala in the Monaragala district.

Although Dole Lanka (Pvt) Ltd runs the Lunugamvehera and Buttala banana plantations under their own name, the banana plantations in Somawathiya and Buttala are being carried out by their local subsidiaries –Letsgrow (Pvt) Ltd and Ranabima (Pvt) Ltd respectively.

None of these projects at Somawathiya National Park, Lunugamvehera National Park and in Buttala have obtained Wild Life Conservation Department, the Forest Department, Agrarian Services Department, Central Environmental Authority, Irrigation Department, Archaeological Department and the respective District and Divisional Secretaries approval as per the State Land Ordinance, to clear the forests.

The Sunday Leader on many occasions tried to contact Dole Lanka (Pvt) Ltd but to no avail. We contacted their lawyer John Wilson of 365, Dam Street, Colombo 12 and Company Secretary Wewe Mudiyanselage Keerthi Kumara Weerasekera of 365, Dam Street, Colombo 12 and requested a contact number for Dole Lanka, but they refused to furnish details about the company. Later we were asked to send an official request to John Wilson. However, he has not responded for the past one week.

When The Sunday Leader visited the Dole Lanka office at 252, Nawala Road, Nawala, Rajagiriya on August 30 to speak to its General Manager Lenardo, neither he nor Director Human Resources Anusha were willing to speak with us. All attempts to speak to them over their general number also failed.

“Dole Lanka has openly violated the State land Ordinance and why are the authorities concerned silent without taking action against this company? Who is the powerful person behind these deals?” Environment Conservation Trust Director Sajeewa Chamakara queried.

As The Sunday Leader reported earlier 11,600 acres of thick jungle belonging to the Somawathiya National Park and National Live Stock Development Board have been given by the Defence Ministry to Letsgrow (Pvt) Ltd which is a local subsidiary of Dole Food Company.

According to Conservator General of Forests H. M. P. Hitisekera, lands covered by natural vegetation cannot be transferred to any other party without the approval of the Lands Commissioner.

In that context, who has given authority to the Defence Ministry to give away 11,600 acres from Somawathiya to Letsgrow which is owned by Pramodya Wickremasinghe- former Sri Lankan fast bowler, Muthiah Sasidaran – brother of former Sri Lankan spin bowler Muthiah Muralitharan and Sarath Wickremaratne.

Questions have been raised as to whether this ‘illegal land transaction’ was an incentive to Pramodya Wickremasinghe to crossover from the UNP to the ruling party prior to the Presidential election in 2010.

According to the Department of Registrar of Companies, Dole Lanka (Pvt) Ltd was registered on September 9, 2008 and the Directors are Wenceslao (Jr) Abilay and James Prideaux both from the Philippines and their registered local office is at 252, Nawala Road, Nawala, Rajagiriya.

Environmentalist Raveendra Kariyawasam at the National Coordinator Centre for Environmental Studies told The Sunday Leader that 3,000 acres have been given to Dole Lanka in Lunugamvehera.

“This 3,000 acre land belongs to the Lunugamvehera National Park and the Forest Department. This was an elephant corridor previously. They have neither obtained the Environment Impact Assessment (EIA) report nor the other approvals from the relevant government departments,” he said.

In addition to which an illegal elephant drive in Lunugamwehera has been carried out by Dole Lanka in order to save their plantation at Lunugamvehera, alleged Environmentalist and elephant enthusiast, Pubudu Weeraratne. More than 40-50 elephants had been driven from Handapanagala to the Lunugamwehera National Park in August 2010. This was carried out despite the fact that 25 elephants out of the 350 that was driven away from the Uda Matthala and Pahala Matthala to the Lunugamwehera National Park in 2008 died due to lack of food and water.

According to Kariyawasam Dole Lanka has denied water for the farmers from the Wekada Wewa in Buttala. Over the past several years the villagers have been taking water from this tank for their cultivations. The banana plantation has expanded round this tank and blocked the waterway denying water to the villagers. In addition to which they have also cleared the Menik Ganga reservation for the banana plantation.

Jagath Gunawardena, Attorney-at-Law specialising in environmental laws says that, preventing the villagers from drawing water from a water source they have used for years is against the Agrarian Development Act No: 46 of 2000.

According to the Department of Registrar of Companies, Ranabima (Pvt) Ltd was registered on March 8, 2010 and its only Director is Rohan Pushpa Kumara Liyanagamage of ‘Maithree’ 16th Mile Post, Raja Mawatha, Buttala.

It is alleged that Chief Minister Uva Province and current Basnayake Nilame (Lay Custodian) of the Ruhunu Maha Kataragama Devalaya Shashindra Rajapaksa who is also the eldest son of Speaker Chamal Rajapaksa and nephew of President Mahinda Rajapaksa is having authority over this company. Four hundred acres of state land in Buttala have been cleared for yet another banana plantation.

“According to the section 9A of the Fauna and Flora Protection Ordinance any development activity carried out within a mile of the boundary of a national park can be done only once the Wild Life Conservation Department (WLCD) gives its approval after studying the EIA report. Once the EIA report is submitted to the WLCD, it will be opened for public comments for a period of 30 days. The report has also to be given to Fauna and Flora Advisory Committee and it is only after this process is completed that the WLCD will decide,” said Gunawardena.

Divisional Secretary Buttala, Gayan Alagiyawatte confirmed to The Sunday Leader that Dole Lanka had obtained 500 acres from the Kataragama Devalaya and added that there is no necessity to obtain approvals from government departments, since this 500 acre land is not crown property.

“This land was given to Dole Lanka by the Kataragama Devalaya and the project began five to eight years ago. Since this is a large scale project this may be a BOI project but they have not sought any permission from us,” he said.

However, Jagath Gunawardena says that whether it is state land or private land of more than two and a half acres, the relevant approvals have to be obtained before developing the land.

“According to section 23AA of the NEA, any project which falls under the category of prescribed projects as per regulation published in Gazette Extraordinary No: 772/ 22 of June 24, 1993, has to go through the process whether it be state or private owned land,” he said.

Although Dole Lanka has not obtained any approval for the Buttala banana plantation, according to Alagiyawatte, Ranabima (Pvt) Ltd (a subsidiary of Dole Lanka) is in the process of requesting the necessary approvals from the government departments for their 400 acre banana cultivation at Demodara in the Monaragala district. However, Ranabima has so far failed to obtain the necessity approvals for their 400 acre project although it began two years ago according to Alagiyawatte. He also acknowledged that these lands are state lands.

All attempts to contact Divisional Secretary Lunugamvehera, Namal Indika Liyanage for a comment on the 3,000 acre Banana plantation at Lunugamvehera failed.

Conservator General of Forest H.M.P. Hitisekera when contacted by The Sunday Leader said that they have not given any approval for banana cultivation in the Monaragala district.

When asked as to what action they will take against Dole Lanka (Pvt) Ltd for clearing more than 3900 acres in the Monaragala district, Hitisekera said that the people and their belongings including the machinery could be taken into custody. “We should be thankful to the media for bringing these issues to our notice so that we can act immediately,” he added.

Chairman Central Environmental Authority (CEA) Charitha Herath said that these projects have neither obtained CEA approval nor have they been submitted for environment impact assessment (EIA).

Director General Wild Life Conservation Department (WLCD) H. D. Ratnayake, too said that the WLCD had not given any approvals to clear jungles for any development projects in the Moneragala district.

© The Sunday Leader

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Rajapaksa comes down heavily on those demanding accountability

The Hindu
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Coming down heavily on countries that demanded accountability for the civilian deaths in the last stages of the Eelam war IV in early 2009, Sri Lankan President Mahinda Rajapaksa said that for most of those who demand accountability, it was only a “verbal apology for civilian deaths that are dismissed as collateral damage in heavy bombings.”

He said the Sri Lankan success against terror was achieved “with much less of the assets, and none of the deceit and duplicity of those [the U.S. and its allies] who have been waging a War on Terror for more than a decade; those with much more economic and fire power than we had and many more allies than we ever had, but are still caught up in the killing fields made by unmanned drones and other lethal devices that attack civilians, too.”

Mr. Rajapaksa accused some countries of providing a “safe haven” to “theoreticians of terror in Sri Lanka,” and regretted that “the very individuals and institutions that point their fingers at us for our defeat of terror seem to be unaware of the truth about our prolonged battle against terrorism, and the very nature of those terrorists.”

Mr. Rajapaksa said that Sri Lanka was on the path of reconstruction and reconciliation, and sought to consolidate the peace that had dawned after a protracted battle. “We are diverting all our energies to put the tragic years of terror well behind us. We are building a new society, learning from the lessons of the past, and moving towards the promise of future success,” he said, and added that Sri Lanka remained committed to protecting human rights and equality for all.

Media exchanges

Describing the South Asian Association for Regional Cooperation (SAARC) as an “under-performing regional forum,” N. Ram, Editor-in-Chief, The Hindu, said that because of the commonalities that exist in the region much more could be achieved.

Making a plea on behalf of the media, he said that an environment should be created where bonafide journalists in the region should be able to travel freely across countries in South Asia. Noting that the region had a thriving media across all platforms – print, electronic and the web – he appealed for a free exchange of media products across countries. While the internet had made it possible to access media products of other countries, Net penetration was poor, he added.

‘Strengthen existing bonds’

Calling for a strengthening of existing bonds, Kalyan Banerjee, president of Rotary International, said that if the region placed economics over the regional politics, cooperation in both areas would grow. Describing Polio Plus as a major success of the Rotary, he recalled instances where the programme helped unite people in a manner never witnessed before.

Sri Lankan Central Bank Governor Ajith Nivarad Cabraal said that to derive benefits of regional cooperation, member countries must be ready to open themselves up to their neighbours, and do so in a spirit of mutual trust. Also, to closely balance competing interests, regimes must develop their institutions to accommodate increased integration and cooperation.

Habil Khorakiwala, chairman, Wockhardt Group, India, wanted India to play a lead role in strengthening the bonds among people in the region. Rajendra K.Saboo, past president, Rotary International, said that the conference was being held at a time when there was need for a new vision for South Asia.

K. R. Ravindran, past director, RI, said that the conference was returning to Sri Lanka after 29 years. Rotarian Sushil Gupta said that the movement would take up issues that affected communities in South Asia but would shun any political affiliation. Rotarian Benjamin Cherian said that the aim of the conference was to bring people in South Asia closer.

© The Hindu

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Sri Lanka: Trade gap swelling to unprecedented levels

By Nimal Sanderatne | The Sunday Times
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The trade deficit is rising to alarming proportions this year. In the first half of this year the trade deficit grew to US$ 4250 million. This is larger than the trade deficit of US$ 3122 million for the full year in 2009 and is as much as 82 per cent of the large trade deficit of US$ 5205 million in 2010. It is likely that at year’s end, the 2011 trade deficit would be around US$ 8 to 9 billion. Despite the gravity of the emerging trade scenario, there is little concern about it owing to several extenuating circumstances.

Notwithstanding the projected massive trade deficit of around US$ 8 to 9 billion this year, a balance of payments surplus is expected at year’s end. This is due to the higher tourist earnings, substantial worker remittances and capital inflows, including large foreign borrowing. However the surplus in the balance of payments achieved in this manner should not lead to complacency on the emerging huge trade deficit, as the country’s foreign debt is large and the large trade deficit is due to fundamental weakness in the economy that should be remedied. Furthermore, the magnitude of the trade deficit and emerging unfavourable global developments that may affect exports and inward remittances leaves the prospect of a balance of payments surplus this year in doubt. However large capital inflows could transform this year’s massive trade deficit into a balance of payments surplus.

Trade balance

Harping on the growth in exports this year and the strong position of foreign reserves blinds us to the much higher growth in imports that has led to a record trade deficit of US $ 4.25 billion. The tenor of the news releases of the Central Bank emphasizes the export growth and the foreign reserve position, while underplaying the emerging huge trade deficit. The external finances of the country have been considered to be healthy for some time. After the crisis the country faced in 2009, foreign reserves have been rising and were in the range of US$ 8 billion at end July. Such a reserve is adequate to cover 5 to 6 months of imports. The Central Bank has been euphoric about the external finances of the country, especially the export growth and the level of foreign reserves. The Central Bank is of the view that the country’s external finances are in a good position. One may ask whether there is any merit in talking about the reserve position, when much of it is based on foreign borrowings. In fact the Central Bank itself says the increase in reserves is due to the recent borrowing. It says “…gross official reserves…increased significantly to US dollars 8.1 billion by end July 2011, mainly due to the receipt of proceeds of the fourth International Sovereign Bond of US dollars 1 billion.”

In the first half of the year the trade deficit ballooned to a massive US $ 4.25 billion mainly due to a huge increase in import expenditure. The impressive growth in exports was unable to contain the deficit owing to the much larger growth in imports. Export earnings during the first six months increased by 35.2 per cent compared to that of first half of last year to US$ 5,057 million. This is indeed a very impressive growth in exports. In comparison import expenditure increased by 46.5 per cent during the first six months compared to that of the first half of last year to reach US$ 9,307 million. This massive surge in imports was due to increased expenditure on consumer, intermediate and investment goods. Consumer goods imports grew by 56 per cent, intermediate goods by 45 per cent and investment goods by 53 per cent.

The growth in exports in the first half of the year was the result of increases in both agricultural and industrial exports, with the latter being impressive. Agricultural exports increased by 17.7 per cent with tea exports contributing by a growth of 8.5 per cent. More striking was the industrial export performance that grew by an impressive 41 per cent. The country’s main export--textiles and garments--increased by 34.7 per cent, while rubber manufactures increased by 86.2 per cent. Notwithstanding the impressive growth in exports, the significant increase in imports resulted in the country having a large trade deficit of US$ 4.25 million for one half of the year.

External finances

The high level of external reserves has been a boast of the country. No doubt a foreign exchange reserve of US$ 8 billion is a satisfactory feature of the economy. Yet how these reserves were built up and the contingent liabilities they involve are significant. These reserves have not been earned by export earnings. In fact the country has had continuing and increasing trade deficits over many years. The large volume of remittances received by the country has been an important source of support to the balance of payments. These have reduced the liability of the trade deficit. Tourist earnings since the war ended have also contributed to balancing the external payments. Then there is the large amount of foreign borrowings. At the end of last year the foreign debt had reached over three times the foreign reserve of the country.

Concerns

There are several reasons why the trade performance of the country could be adversely affected in the next six months. The crises in Middle Eastern countries could affect exports and the balance of payments adversely in several ways. One of these is theimpact of the turmoil on the country’s export of tea. The disruption in the region could reduce tea exports to Libya, Syria and Iraq that are good markets for Ceylon tea. In fact already there are signs that this is happening. Furthermore, worker remittances that are an important source of funding the trade deficit could experience a dip. Over 50 per cent of worker remittances come from the Middle East and if migration to these countries decline, remittances could be adversely affected. The rate of increase in remittances appears to have been already affected. In the last two years, while the trade deficit was increasing, remittances too increased. In 2010, 80 per cent of the trade deficit was offset by remittances. In the first half of this year remittances increased by 26 per cent but the trade deficit increased so much more that the remittances would offset only about two-thirds of the trade deficit.

Therefore the increasing trade deficit will be financed by remittances to a lesser extent. The third factor of significance is that the global recovery has retarded and another wave of global recession is expected. Recessionary conditions in North America and Europe would decrease the demand for industrial exports.

With these facts in mind could it be said that the external finances of the country are in a good state? The external reserve position is no good measure of the state of external finances owing to a large amount of borrowing that has been a significant source for these reserves. Both agricultural and industrial exports have fared well this year.

The increases in industrial exports are especially noteworthy. Yet, export growth has been outpaced by the growth in import expenditure and there is an unprecedented massive trade deficit. In just six months the trade deficit has ballooned to US$ 4.25 million. If this trend continues then the trade deficit will be a massive US$ 8 to 9 billion. Such a large trade deficit should be a national concern as it threatens the balance of payments and the foreign reserves.

The fact that tourist earnings are increasing and there are significant inflows of remittances is not a reason to neglect the fundamental issues involved in such a trade imbalance. In a situation where exports are growing, the root cause of the trade deficit is the large expenditure on imports. Countervailing measures should be taken to restrain imports. The incontrovertible fact is that we are living beyond our means.

© The Sunday Times

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Sri Lanka: Rajapakse brinkmanship

Himal South Asian
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The last few years in Sri Lanka have been marked by numerous elections at various levels – presidential, parliamentary, provincial council and local government. The Mahinda Rajapakse regime won all these elections with landslide victories, and now controls all eight provincial councils, barring the Northern Provincial Council for which elections are yet to be held. Indeed, the regime seemed to have mastered the art of electoral politics, ensuring its legitimacy and overwhelming power at a time when the United National Party (UNP), the main opposition, is in shambles.

It was against this backdrop that the second round of local government elections for 65 seats took place in late July, following on local government elections for 234 local authorities in March. The July elections included 20 positions in the war-affected north. What were essentially elections of no particular consequence on a national scale were turned into a major contest by the Rajapakse government, pitting a vision of economic development versus a political solution including accountability for war-time abuses. Confident of their ability to railroad any election, numerous ministers, President Rajapakse and his close relatives in government all campaigned hard in the north. They liberally distributed hand-outs ranging from sewing machines to water pumps and bicycles to the public, as well as many promises of development projects. The intention was clearly to deflect mounting international pressure by showing that the Tamil community in the north stood with the government.

Having raised the stakes in these local elections, however, President Rajapakse’s United People’s Freedom Alliance (UPFA)-led coalition suffered a major defeat in the north, winning only three councils in Jaffna. Twenty councils, consisting of the rest of the local authorities in the north and a few more in the east, were won by the Tamil National Alliance, including two by the Tamil United Liberation Front (TULF). On the other hand, the UPFA swept the polls throughout the rest of the country, in fact winning every single local authority. Still, in the final analysis, the elections in the north clearly signalled that the Colombo regime has little support among the war-affected Tamil community.

On the heels of these results, the TNA, which has been engaged in negotiations with the government on a constitutional political solution, demanded that the government clarify its stance on certain aspects of this proposed solution. These negotiations, initiated in January and encouraged by New Delhi, have not made much progress, mainly due to the lack of seriousness on the part of the Colombo. The TNA’s new demands – that the government clarify its position on the future structure of governance, the separation of powers between the Centre and devolved units, and the financial powers important for devolution – have now earned it the ire of the three Rajapakse brothers – besides the president, Defence Secretary Gotabaya Rajapakse and Minister for Economic Development Basil Rajapakse – who control much of the government. The main thrust of their attack has been that the TNA has been acting like its former master, the LTTE. While there is undeniably a need for sections of the TNA to rethink their politics, the irony is that a number of former LTTE leaders and cadres are now closely collaborating with the Colombo government in their bid to strong-arm the Tamil community. Former LTTE Commander Karuna is a minister, and former LTTE arms-procurement chief K Pathmanathan is now collaborating with Colombo on rehabilitation in the north.

‘We have done enough’

As Himal goes to press, President Rajapakse is initiating a Parliamentary Select Committee to look into the constitutional settlement. However, this is seen by many as an exercise merely to buy time and ward off mounting international pressure. Indeed, from 2006 to 2009, the president had initiated an All Party Representative Committee (APRC) to look into a constitutional political settlement, but there has been no concrete result from the consensus reached in the APRC and its report. In fact, the report submitted to the president in 2010 was never made public, with the president having now effectively buried it. This casts doubt on the rationale behind the initiation of yet another political process towards a constitutional settlement.

The government’s real position appears to have been expressed recently by Defence Secretary Rajapakse. ‘The existing constitution is more than enough for us to live together,’ he claimed in a 5 August interview. ‘Devolution-wise I think we have done enough, I don’t think there is a necessity to go beyond that.’ He went further, to attack politicians in Tamil Nadu including Chief Minister Jayalalithaa, claiming that their statements about the situation of Tamils in Sri Lanka were intended merely to ‘gain political advantage’.

In the face of mounting pressure from India for a political settlement, and vocal ultimatums from the US and UK in recent months around the issue of war-time accountability, President Rajapakse has gone on yet another visit to Beijing to mobilise international support. While recent concerns from India about the situation in Sri Lanka have led to the government considering ending the state of emergency, the major point of contention remains a constitutional political solution. Here, given the regime’s commitment to the Sinhalese-Buddhist nationalist agenda, it remains unwilling to address the political grievances and aspirations of the minorities, particularly in relation the important issue of devolution of power.

President Rajapakse’s continuing dithering on post-war political reconciliation, the international concern about the country’s war-time abuses (as again raised by a recent UN Panel Report and an expose on Channel Four television), and the increasing mobilisation of a variety of political actors in India – all of these have put Sri Lanka on a confrontational path with its northern neighbour. For the first time in recent history, Sri Lanka is fast becoming a national issue in India, and not just one restricted to Tamil Nadu or one that is determined by the bureaucracy in the Indian Foreign Service.

The Rajapakses, having won the war two years ago and dominated electoral politics since then, could have neutralised international pressure if they were willing to make certain compromises. However, the regime is continuing with the same aggressive tactics with powerful international actors that it uses on the domestic front. Such brinkmanship comes with risks not only for the government but for Lanka as a whole, as it could lead to polarisation and political damage, bypassing the post-war opportunity for reconciliation.

© Himal

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