661 Days: Where is Prageeth?

Sri Lanka Guardian
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There was a media Conference called by wife of Pragith Ekneligoda, Mrs. Sandya Ekneligoda at the Centre For Society and Religion Auditorium, Colombo, today (17).

It was pointed out that during the 2nd day of the 47th Session on Sri Lanka at the CAT Committee in Geneva, Sri Lanka's ex Attorney General Mr. Mohan Peiris,made some references on the issue of the forced disappearance of Pragith Ekneligoda, claiming that according to reliable information that he could vouch for, Mr. Ekneligoda has taken refuge in a foreign country and that the campaign against his disappearance is a hoax.

Mr. Peiris failed to provide detailed information on the alleged whereabouts of Mr. Ekneligoda despite claiming that he had "reliable information". He did not name the country, where he is now. So Pragith’s wife wants Mr. Mohan Peiris to disclose the details of the whereabouts of her husband. Speaking further, she said that on 23rd of Nov., the case in the magistrate courts, Homagama re’ the disappearance of Pragith is to be called and before that she needed the said information from Mr.Peiris.

Pragith Ekneligoda, a political columnist and cartoonist with Lanka-e-news website and a freelance journalist who was known for his anti-government news and cartoons went missing on January 24, 2010, just days before the presidential election and it is 661 days now for his disappearance. He was believed to be a supporter of the common opposition presidential candidate,Mr. Sarath Fonseka.

Mr.Mangala Samarawira, on behalf of United National Party told the gathering that as the opposition, they will do their best to protest for this. He said that they plan to formulate a program me for protesting Avanitiya (lawlessness) of the country during the coming months with the support of everybody. He reminded that President is only caretaker of the country but not the King of this country. Replying to a question, posed by Mr. Elmo Fernando, BBC Sandeshaya, he said that though, he admits that there are problems in the opposition party, they will forget the differences and fight for the common good.

Dr. Nimalka Fernando explained the gathering how Mr. Peiris was responding to the CAT committee about Pragith and other journalists who were attacked. Mr.Jayantha Katagoda M.P.in the National Alliance, Dr. Wickramabahu Karunaratne, Mr. Siritunga Jayasuriya, Mr. Linus Jayatilaka, and K.D.C. Kumarage, A A L also spoke.

© Sri Lanka Guardian

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Murdered Sri Lanka politician's family hail MP's arrest

BBC News
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The daughter of a Sri Lankan politician shot dead last month has welcomed a court move to arrest an MP in connection with his killing.

Speaking to the BBC from an undisclosed location outside Sri Lanka, Hirunika Premachandra said that the news had restored her faith in the judiciary.

Her father Bharatha Lakshman was allegedly killed by MP Duminda Silva.

Mr Silva was injured when shooting broke out in Colombo between rival members of the governing party.

On Tuesday a court said that Mr Silva should be arrested and produced before a court even though his name is not among the list of 15 police suspects wanted in connection with the violence.

He is currently believed to be receiving medical treatment for severe injuries in a hospital in Singapore.

Gun culture

"I think this is the first time I felt happy since my father passed away," Ms Premachandra told the BBC Sinhala service.

"It is not because somebody is being sent to prison but because we can still trust the judicial system in Sri Lanka.

"I salute the judge for making us still believe in the judiciary."

Presidential adviser Mr Lakshman was among four people killed when shooting broke out within the governing United People's Front Alliance as local elections were being held in a suburb of Colombo on 8 October.

Police said on Tuesday that there was not enough evidence to arrest Mr Silva and that he was "not of sound mind".

However, considering the evidence, the magistrate ordered the MP's immediate arrest.

Police quoting Mr Lakshman's driver said that Mr Silva blocked Mr Lakshman's vehicle and shot him. But, the officer said, other eyewitnesses had contradicted this.

The BBC's Charles Haviland in Colombo says that several other people have been detained in connection with the violence, including Mr Silva's bodyguard and a man widely described as an "underworld figure" who was with Mr Silva at the time.

Defence Secretary Gotabhaya Rajapaksa countered widespread allegations against Mr Silva by saying he was "not a known underworld king pin or some drug dealer - he's an elected MP".

But Mr Rajapaksa admitted that politicians in the area where the gunfight took place had connections with the underworld and its gun culture.

© BBC News

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Child exploitation on the rise-Police

By Supun Dias | Daily Mirror
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The police department has detected an increase in child abuse cases ranging from rape to sexual harassment with 850 such cases being reported this year.

Police spokesman Ajith Rohana said that the number is relatively high when compared with the last two years.

“Notably the children who fell prey to these suspects are ones who live alone or children who are isolated in the society,” he said.

“There is a police women and childrens bureau headed by a senior woman police officer in every police station. Priority is always given to such unfortunate incidents,” he said.

The Ministry of Justice and the Attorney Generals Department is cooperating with the police to resolve such cases.

© Daily Mirror

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More UK firms interested in Sri Lanka

The Island
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British High Commissioner John Rankin says he will encourage more UK companies to consider Sri Lanka as an ethical and profitable partner while the UK Trade and Investment Section of the British High Commission was having a record year in terms of enquiries from British companies wishing to do business in here and develop trade partnerships.

"In that context I welcome the Sri Lankan government’s efforts to improve the business environment by tackling existing barriers to trade and streamlining bureaucracy. I also appreciate recent efforts by the government to ask local business leaders what they need from government to help them succeed," he said speaking at the AGM of the Sri Lanka Apparel Exporters Association.

The High Commissioner paid a tribute to the country’s garment industry as well.

"I applaud the continued industry move away from low-value products towards high-value niche garments, using the latest high-tech fabrics, particularly in sportswear and women’s underwear," Rankin said.

He also touched on the loss of GSP+ trade concessions to the EU.

"The loss of duty concessions under the EU’s Generalised System of Preferences does not so far appear to have greatly affected the volume of Sri Lankan exports to Europe. Indeed overall exports are still on track to rise year on year. But I recognise that margins may have been tightened."

Excerpts of Rankin’s speech follows:

"With the increased investment in ports and roads that is taking place in this country, I believe that Sri Lanka is well placed to position itself as a logistics hub for clothing manufacturers across the region.

Western Economic Challenges...

The United Kingdom, and Europe as a whole, is of course the single biggest market for your exports. You will all have seen in your newspapers this morning the comments of Christine Lagarde, the Managing Director of the IMF, that Asia will not be immune from the current economic challenges facing the Euro Zone, and which also affect the UK and the USA. But I am pleased to note that so far your sector has been resilient in the face of the economic downturn in these western markets. While I will resist a prediction of the precise outcome of the current economic turbulence for your sector, I can tell you that the UK companies to whom I have spoken in my work continue to see Sri Lanka as a primary source of high quality, affordable clothing .

Having said that, there is no doubt that retailers in the UK, as elsewhere, will be keener than ever to keep a tight rein on costs. So I hope that customers and manufacturers can work together even more closely to increase productivity, shorten lead times, streamline logistics and innovate where possible.

GSP Plus...

I am aware of the controversy over the loss of GSP+, which occurred prior to my arrival in Sri Lanka. The loss of duty concessions under the EU’s Generalised System of Preferences does not so far appear to have greatly affected the volume of Sri Lankan exports to Europe. Indeed overall exports are still on track to rise year on year. But I recognise that margins may have been tightened.

Sri Lanka could still profit by regaining the GSP+ concession. But, it is for the Government of Sri Lanka to decide whether it wishes to meet the GSP requirements and re-apply for its benefits.

Sustainability...

In the nine months I have been here I have tried to develop a hands-on understanding of your industry. I have visited a number of clothing factories and would note how impressed I have been with what I have seen so far - clean, modern factories with good working conditions for their staff. And I applaud the continued industry move away from low-value products towards high-value niche garments, using the latest high-tech fabrics, particularly in sportswear and women’s underwear.

During my discussion with representatives of your industry I have also heard that the long-term sustainability of the industry is likely to depend on increased automation and increased use of Computer Aided Manufacturing and Design machines.

This new emphasis on design is an important one. The UK has long been a centre of design excellence, with our world class fashion designers. But I’ve been delighted to see the growth in Sri Lanka’s own domestic design process – creating your own unique brands.

The Sri Lanka Design Festival, in which the UK’s British Council and UK designers play a strong role, showcases the local industry, including both modern clothing and traditional hand-loom garments and craft items. Sri Lanka is also taking a regional lead in South Asia on implementing ‘green’ measures and ethical manufacturing practices which I welcome. Marks and Spencer’s first carbon neutral lingerie was produced here in Sri Lanka.

Developing the economy...

I look forward to encouraging more UK companies to consider Sri Lanka as an ethical and profitable trading partner. In that context I welcome the Sri Lankan Government’s efforts to improve the business environment by tackling existing barriers to trade and streamlining bureaucracy. I also appreciate recent efforts by the Government to ask local business leaders what they need from Government to help them succeed.

The answer that I have heard from UK companies, and more widely, is that they hope the Government will provide four things: certainty and stability; increased transparency over Government contracts; tax incentives to allow them to grow; and confidence that their investments will not be subject to arbitrary action. Above all they want more ‘room’ for businesses to simply get on with what they do best - doing business.

The UK Government has recognised this, by taking decisive action to tackle its budget deficit and by gearing its economic policies heavily in support of both foreign investment and exports. We believe this is the only way to achieve strong, sustainable and balanced growth.

Despite challenging times for Western economies, I believe that the prospects for bilateral trade between the UK and Sri Lanka remain bright. In 2010 Sri Lankan exports to the UK totalled over US$ 1 billion, and imports from the UK were worth some US$ 186 million. That made the UK Sri Lanka’s second largest trading partner by volume. And there are over 100 companies in Sri Lanka with a UK affiliation including major companies in the garment sourcing sector such as Marks and Spencer, Tesco, Triumph and Next.

This year, the UK Trade and Investment Section of the British High Commission is having a record year in terms of enquiries from British companies wishing to do business in Sri Lanka and develop trade partnerships – including in the garments industry. This reflects the continued and increasing confidence in the quality of the goods that you all, as members of this Association, produce. Long may you continue to do so."

© The Island

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Sri Lanka central bank pours oil on troubled waters

Lanka Business Online
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Sri Lanka is heading deeper into balance of payments trouble with the monetary system moving into an active sterilized intervention phase, leaving behind any opportunity for an interest rate defence of the peg.

The central bank has given a firm signal that it will not depreciate the currency and take International Monetary Fund advice to float the rupee.

Rates are also not being allowed to go up and money is being printed to keep rates down via sterilized interventions, fuelling demand and adding to balance of payments pressure.

This is no drill

As mentioned in the last column, the developments in the monetary system in July turned out to be just a dress rehearsal. Now sustained sterilization of the balance of payments has begun.

The central bank's T-bill stock rose to 42 billion on September 20 and excess liquidity was lower than that level at 31.4 billion rupees. Put another way, all the excess liquidity can be accounted for by freshly injected rupee reserves.

This money is now being re-absorbed by the newly started repo auctions.

Reserve Outflow

Central Bank's August forex intervention data is now delayed by over two weeks. It is not unusual in Sri Lanka for data to be delayed during a balance of payments crisis.

A back-of-the-envelop calculation, working backwards from available domestic asset data can give some idea of reserve outflows.



Sri Lanka's monetary base expanded from 413.2 billion rupees in end July to 427.2 billion rupees by September 15. In the same period excess rupee liquidity in banks fell to 29.8 billion rupees from 75.3 billion rupees.

The central bank's Treasuries stock which represents fresh injections of rupees through direct bill purchases or reserve appropriations by the state, rose from 1.7 billion rupees to 33.1 billion rupees in the same period.

The sum of the net fall in excess liquidity and the net increase in domestic assets in the period is 76.9 billion rupees. Adjusted for the expansion in reserve money, the net change is 62.9 billion rupees.

It points to an approximate reserve outflow of 570 million dollars in six weeks when an average exchange rate of 110.10 rupees is applied.

Assuming no material change in the monetary base, reserve outflows to September 20 amounts to about 640 million dollars. If the monetary base contracted it is higher, or vice versa.

When added to the 416 million dollar interventions in July the total comes to about a billion dollars, over a period of some 10 weeks.

Interest Rates

Interest rates are at the moment being held back with an expansionary sterilization cycle. Rates will start to move only when sterilization becomes less than 100 percent.

The monetary authority has started cash auctions and it is for the moment withdrawing excess liquidity which was pumped by its own actions and keeping overnight rates at 7.08 percent.

There was a story where in response to a question from an LBO reporter the IMF mission chief advised against an interest rate defence of the peg. But even at the time it was probably an academic question.

Call market data show that if rates were allowed to move up in June as the system tightened it may have been possible to save the peg.

Jack

To some observers the central bank's defence of the peg by targeting both the exchange rate and interest rate seems inexplicable.

But from the point of view of a soft pegged central bank it is not that difficult to explain.

Even the IMF encourages the central bank to collect large amounts of reserves.

After being encouraged to collect reserves, which after all are supposed to be there to be spent when the need arises, everyone suddenly turns around and advises the central bank not to spend the money.

There is a pithy Sinhalese saying that captures the situation very clearly: Yuddeta nethi kaduwa kos kotannader? It means 'If the sword is not available for war, is it being kept around to cut up jack fruit?'

Unfortunately reserve collections - far above the monetary base - is a scam that only benefit the governments of reserve currency central banks, principally the US where they are invested.

It is funny that investors actually draw confidence from looking at large reserves. But large amounts of reserves actually encourage Central Banks to defend pegs and keep rates down, leading to predictable consequences.

External Anchor

There is no doubt that a peg is a useful tool. It impersonally acts as an escape valve for periodic build ups of domestic demand pressure, by dynamically adjusting the money supply to economic needs via the balance of payments.

It stops inflation to around the level generated by the anchor currency.

It stops rulers from destroying the real value of salaries of working people and lifetime financial savings of the old and the weak through currency depreciation - which is already being done to a great extent by the anchor currency central bank that is also printing fiat money.

But all this happens only if the monetary authority is prepared to drop policy rates, like in Singapore (with limited sterilization) and Hong Kong (no sterilization).

To build a peg that is sustainable we need to change our monetary laws.

A 'float' is similar to what gold exchange standard central banks used to call a 'lifting of gold convertibility'. Essentially dollar convertibility at a fixed rate is lifted by a float.

What Next?

The next step may be the start of reverse repo auctions. Some foreign banks are still liquid. They also have limits for local banks. So some amount of excess liquidity can be expected to remain even if reverse repo auctions start eventually.

If some bond holders quit, foreign banks will take paper into their balance sheets and liquidity may also gradually diminish. Bond holders however need not panic, as over the longer term, the peg is likely to brought back to near earlier levels following a float.

Instead of a reverse repo auction, the central bank could continue to buy Treasuries direct and sterilize its effect later.

In the past, the market has seen outright rejections of entire Treasuries auctions, when balance of payments pressures reached crisis territory.

As already mentioned in the last column, higher import taxes could be expected on what authorities quaintly (some would say in a fascist manner) call 'non-essential' consumer goods as if they have a divine right to decide for individual citizens what is essential or not.

Though the spot dollar rate is around 110 rupees, in the forward markets rates have moved up. The three month rate is now about 111.10/15, up about 50 to 60 cents over several weeks.

Waiting Game

Sri Lanka's IMF program is "in abeyance" to use a neutral expression. The mission who left with an "uncompleted review" expects to continue discussions.

In July the Central Bank had eight billion dollars in reserves. At the rate of 300 to 400 million dollar losses of reserves a month it will take several months for reserves to deplete to the level of the monetary base, where it can no longer meet its domestic liabilities in dollars.

In a sterilized intervention phase however, state debt repayments can also become net reserve losses.

Treasuries acquired by the monetary authority in place of reserve appropriations in the middle of an expansionary sterilization cycle cannot be sold to the market to dampen domestic demand in the economy and re-build fresh reserves.

All this can at any time be stopped by a float. Unfortunately until the imbalance is resolved market participants will stop their normal growth generating activities and instead watch the BOP.

This is costly for the economy at a time the global outlook is also far from rosy.

© LBO

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Cold war in the tropics: China, India vie for Maldives

By C. Bryson Hull | Reuters
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On the pristine equatorial shores of the Maldives, an archipelago best known for luxurious resort hideaways swathed in coral reefs and cerulean seas, India and China's regional cold war is warming up.

Stretched across 90,000 sq km (35,000 sq m) of the Indian Ocean southwest of India, the Sunni Muslim nation of 1,192 islands finds itself sandwiched between the two Asian rivals, and both flexed their muscles at a meeting of South Asian nations hosted by the Maldives last week.

China preceded the heads-of-state meeting of the eight-nation South Asian Association for Regional Cooperation (SAARC) by opening its first embassy in the Maldives, a ceremony attended by Vice Foreign Minister Zhang Zhijun.

Two Maldivian officials said China had hurriedly rented a space to open the embassy in time for the summit, while the actual embassy is being built. Officials with the Chinese delegation declined repeated requests by Reuters for comment.

"The bureaucrat in me says the timing is right. You want to open something like that when there is a big official around. But opening it right before SAARC is a way to tweak India," an Asian diplomat told Reuters on condition of anonymity.

China joins India, Sri Lanka, Pakistan and Bangladesh as the only countries with full embassies in the Maldives and, at the SAARC meeting, Beijing pushed to have its observer status raised to dialogue partner, an elevated standing it has with the Association of Southeast Asian Nations (ASEAN).

"There was no hurry or further discussion to make China a dialogue partner," Maldivian President Mohamed Nasheed told reporters after the meeting.

"INDIA'S NEIGHBOURHOOD"

India's response to China's diplomatic display included a show of military force and political largesse.

Navy frigates patrolled off the Gan atoll, where the summit was held, to protect VIP visitors including Afghan President Hamid Karzai, and Prime Minister Manmohan Singh held a one-day state visit to the capital island, Male.

"This is our extended neighbourhood. We wish to work with the Maldives and other like-minded countries to ensure peace and prosperity in the Indian Ocean region," Singh told the Maldivian parliament.

India extended a $100 million credit line, inked pacts on maritime and counterterrorism cooperation, and both nations agreed "their respective territories would not be allowed for any activity inimical to the other and by any quarter".

New Delhi has long been concerned by any moves China makes to boost its presence in neighbouring countries, and is worried about the so-called "string of pearls" ambition to expand Chinese maritime influence in the Indian Ocean and beyond.

"China has made a lot of surge in the Indian Ocean rim countries. Maldives is of particular interest because it can help China gain access to the main regional forum, SAARC," Bhaskar Roy, a strategic affairs expert at the Chennai Centre for China Studies, said.

China made its present felt throughout the SAARC summit. The post-summit giveaway bag included porcelain pens and diaries from the Chinese Foreign Affairs Ministry detailing "Five Years of China-SAARC Cooperation". A box for a new 40-inch TV in the media centre bore a sticker: "China Aid."

CHINA'S TOURIST TAP

While India may have the edge in terms of political clout and military cooperation, China has a softer but no less powerful lever over the Maldives' $1.5 billion economy.

It is the top provider of visitors to the tourism industry, which earns 28 percent of gross domestic product and 90 percent of foreign exchange, with stays costing up to $1,000 a night at paradise resorts on desert islands of pure-white beaches, palm trees and incomparably hued waters.

Chinese tourist arrivals doubled year-on-year in 2010, according to the Maldives Ministry of Tourism, Arts and Culture. By September, this year's 146,668 visitors from China were well past 2010's total of 118,961.

"The Chinese can buy their way into this country. All they have to do is put out a travel advisory saying too many people are drowning and that's it, they will turn those tourists off like a tap," a senior Maldivian official said on condition of anonymity.

The China surge has been a godsend for tourism operators who traditionally rely on Europe and other Western countries for the bulk of visitors, but have seen those numbers fall with the downturn in developed-world economies and European debt crisis.

The Maldivian government wants "to maintain an appropriate balance between Maldives and India and other investors and not have any one country dominate them and exercise inordinate influence over them", a senior U.S. administration official told Reuters on condition of anonymity.

The United States remains concerned, as does India, about China's plans in the Indian Ocean, the official said.

"I think it is important to try to continue to engage them, to stress opportunities for working together, and to stress the importance of them being as transparent as possible about what their economic and military intentions are," the official said.

The president, Nasheed, was unequivocal when asked how the Maldives would avoid becoming a pawn between Asia's giant rivals.

"We've made it very clear that India is our best friend and neighbour and we will continue along those lines," he told reporters, prompting immediate questions from journalists present from China's state media.

"There won't be any issue because of the Maldives' friendship with any other country," Nasheed said, smiling.

© Reuters

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