Monopoly Building In Sri Lanka
Ravi Perera
The recent acquisition by Dhammika Perera the Sri Lankan business mogul (with related parties) of Lanka Ceramics, a large public quoted company, brings into focus once again the gaping lack of laws and regulations concerning commercial activities in this country. Not only do we not have laws governing vital areas of the economy but more importantly suffer from an obvious ignorance in such matters at the highest levels.
Mr. Dhammika Perera also owns Royal Ceramics which is another public quoted company in the same business as Lanka Ceramics, namely tiles. With the acquisition last week of Lanka Ceramics he is now in a near monopolistic position in this area of economic activity. It is well known that Mr. Perera, who is undoubtedly one of the richest men in this country, also has controlling stakes in large companies such as Hayleys, Amaya leisure, Fortress resorts, Vallibel Finance, LB Finance and New World Securities.
Given this background, in a more advanced country Mr. Perera would be subject to various regulatory regimens. His wide business interests make him an interested party in many economic activities/policies of the country in a significant way. As such, in a country with developed systems his activities would be monitored and regulated by the State in the greater interest of the public. But leave alone monitoring his activities, it is an astonishing fact that this government thought it fit to appoint him at one time as a Secretary of a Ministry and also the Chairman of the vital Board of Investments (BOI).In these positions Mr. Dhammika Perera was wearing the hats of an administrator, policy maker and in a way a regulator. As a Secretary of a government ministry, he would be privy to policy considerations and other concerns of the government at the highest levels. In the shoes of a senior public servant he also has direct access to decision makers in the government.
It may well be true today that our senior public servants are poor quality, their spirit broken by years of relentless politicizing and corruption. Although politicians who are responsible for this state of affairs would hate to admit it, even they have to accept the reality and bring people from outside to fill various posts including the Secretary posts of the various ministries. But this does surely mean appointing persons with potential conflict of interests’ situations to these sensitive positions.
The main function of the Board of Investments is that of a facilitator for foreign investors. It has the power to grant various incentives to investors such as tax holidays, preferential tax rates, exemptions from custom duty and foreign exchange controls among other things. For a businessman competing with his many rivals locally, this would be a very tempting opportunity indeed to reward friends and deny competitors.
We have nothing personal against Mr.Dhammika Perera who by all accounts is a success story which should be admired. By any means this is not the first time that businessmen with potential conflict of interest situations have been appointed to high public posts in this country , the appointment of Harry Jayawardena to various government Boards by the previous government being one. But what concerns us is a style of government which completely ignores fundamental economic/legal/moral concerns such as conflict of interest situations, influence peddling and monopoly building which are concepts fundamental to good governance.
With such an attitude of indifference prevailing, the fact that we do not have an anti-trusts authority as in most countries is not surprising. Although we eagerly seek respect from the rest of the world, to put the house in order is not a priority for us. Whatever institutional steps we have taken to curb harmful economic activity in the past have turned out to be toothless tigers because of corruption and political influences.
It is basic economics that a monopoly is bad for the consumer because of the arbitrary pricing power it commands as well as its tendency to lower the quality of the product as the consumer really has no choice in the matter. Monopoly power in sectors such as banking and media can have other ill-effects as well. Overall, monopolies and cartels are considered anti-competitive and harmful to a market economy.
There are certain situations where monopolies become inevitable for reasons such as very high start-up costs and practical difficulties in competition. It is very difficult to conceive of a large city having several water or power suppliers. Similarly a sewerage system cannot have too many suppliers due to problems such as providing multiple sewer lines etc. Equally, in a very small or remote area we cannot have several supermarkets competing for a few customers. Then we also have legally created monopolies by way of intellectual property, generally patents and trademarks.
However in the bigger scheme of things governments are mindful of the dangers that monopolies can pose to the economic well fare of a country. They put in place monitoring and regulating bodies such as fair trading and competition commissions.
A few years back the giant Microsoft Corporation was ordered to de-merge their Microsoft Internet explorer from the Microsoft Windows products as it was considered a monopoly activity. It is noteworthy that in this case the customers had other options. There were other products in the market and the customers were not compelled to buy Microsoft products. Yet the authorities broke up the behemoth Microsoft on the basis of anti-competition laws and it is said the loss to the company was something like US $ 70 Billion!
We also have the example of the iconic AT and T of the USA which was broken into smaller entities popularly called baby bells sometime in 1982 again due to anti-trust litigation.
Certain shopping centres in the Developed countries now even have restrictions on the number of shops that one company may have in a geographic area.
In Sri Lanka we live in ignorant bliss about issues such as monopolies. Even a casual glance at some of our economic activity will reveal a worrying degree of monopoly activity both horizontal as well as vertical. We have for example only two large supermarket chains in the country. Between the two they probably command about 50-70 % of the supermarket consumers. Some of these supermarkets also have their own supply chains in the form of farms and manufacturers feeding the supermarkets. By restricting the products of outside manufacturers at their supermarkets they can easily cutoff the markets for outside manufacturers. Once the other manufactures are destroyed these supermarkets can well end up with the power to demand predatory prices for their products, which they produce and market through their monopolistic supermarkets.
Usually on Sundays I used to enjoy a packet of lamprais at a popular fast food chain. They were selling a packet at Rs. 330/ This Sunday I was astonished to discover that it had been raised to Rs. 400/, a 20% plus jump in the price! As we know nothing happened in recent times in the local economy to justify such a jump. Of course this food chain is not a monopoly and it is not essential for a person to have a lamprais for lunch. But in a case of a monopoly in a vital area the consumer will have nowhere to turn. Predatory pricing and shoddy quality may well become his daily reality.
Sri Lanka: A People Without A Story
Aatish
Taseer
Four years ago this week,
the Liberation
Tigers of Tamil Eelam announced that their struggle for an
independent homeland in northern Sri Lanka had “reached its bitter end.” The
group had been fighting on behalf of the Tamil people for more than a
quarter-century, and its defeat was absolute.
Today,
great sections of Tamil country are still a scene of devastation. The houses are
either destroyed or brand-new; the land is uncultivated and overgrown; there are
forests of decapitated Palmyra palms, damaged by heavy shelling. And then there
are the relics of war — graveyards of L.T.T.E. vehicles rotting in the open air;
the remains of a ship, its superstructure blown to pieces and in whose rusting
starboard a gaping hole gives on to blue sea.
When
I first arrived there last March, I saw the loss in primarily military terms.
But the feeling of defeat among the Tamils of Sri Lanka goes far deeper than the
material defeat of the rebels. It is a moral and psychological defeat.
In
that forested country of red earth and lagoons, it is possible to visit the
bunker of the leader of the Tigers, a torture chamber of a place that sinks
three levels into the ground. There, in the fetid air, infused with the smell of
urine and bat excrement, one senses the full futility and wretchedness of what
the rebel movement became in the end.
For
the truth is that the Tamil defeat has less to do with the vanquishing of the
L.T.T.E. by the Sri
Lankan Army and much more to do with the self-wounding (“suicidal”
would not be too strong a word) character of the movement itself. The Tigers
were for so long the custodians of the Tamil people’s hope of self-realization.
But theirs was a deeply flawed organization. Under the leadership of Velupillai
Prabhakaran, the Tigers pioneered and perfected the use of the
suicide bomber. This was not simply a mode of warfare, but almost a symbol, an
expression of a self-annihilating spirit. And it was to self-annihilation that
Mr. Prabhakaran committed the Tamils. He was a man who, like a modern-day
Coriolanus, seemed to lack the imagination for peace. He took the Tamils on a
journey of war without end, where no offer of compromise was ever enough, and
where all forms of moderation were seen as betrayal.
One
evening, soon after I arrived in Jaffna, the capital of the northern province, I
had dinner at the house of a woman whose sister had been part of a circle of
academics who had published a book in 1990 called “The Broken Palmyra.” The book
was, by no means, a simple polemic against the Tigers; it was an academic work
that, in trying to be evenhanded, had taken account of both government and
L.T.T.E. atrocities. But this was too treasonous for Mr. Prabhakaran, and my
host’s sister was killed even before the book went to print.
The
room that night was filled with people whose lives the tyranny of the L.T.T.E.
had left forever scarred. There was the Muslim woman who, along with all the
other Muslim families of Jaffna, had, one morning in 1990, been summoned to a
school compound and given two hours to leave the city of her birth. They were
told to leave behind their valuables and the deeds to their houses. When they
asked why they were being expelled, they were told that they were lucky not to
be killed. Then they were loaded into lorries and escorted to the border of the
district. (Like most, this woman returned only after the end of the war in
2009.)
A
middle-aged woman, working as a maid in the house, had more recent traumas. Her
son had gone to work with his uncle, a carpenter, in the northern district of
Kilinochchi, which would become the scene of an infamous battle. When war came,
it was Mr. Prabhakaran’s express strategy to retreat with an enormous civilian
population — 300,000 people, some say — and to use them as a human shield
against the advancing army. It was his intention to let so many Tamils die that
the international community (read, the West) would be forced to intervene, and
the Tamils would be granted their homeland.
But
here he made a grave mistake: he either overestimated his own importance; or
else, the West’s sense of decency. For the West, occupied with problems more
pressing, let as many Tamils die as had to die for the war to be won.
This
was an added layer of shame in the Tamil defeat. It was not just that they had
lost the war. It was also that the grass-roots movement they originated, and for
which they had paid taxes and sacrificed able-bodied men and women, had, in the
end, been more vicious to them than to anyone else.
When
I asked what became of the woman’s son, she replied that he had not come home.
“He’s dead,” my hostess clarified, “but she doesn’t like to hear that.”
The
north of Sri Lanka today is a spectacle of Sinhalese triumphalism. A victorious
army is rebuilding new roads, grabbing land for itself (6,000 acres, rumor has
it), and displaying the spoils of war before tourists from the south.
Even
when the government of President Mahinda
Rajapaksa acts magnanimously toward the Tamil people, by building new
infrastructure projects, for instance, the Tamils seem to feel that their defeat
is being rubbed in their faces. And they are not wrong. It is simply one of
those intractable situations where nothing will feel right. For the loss the
Tamils feel is really the loss of a story. They are now a people without a
story, a traumatized people, devastated by decades of war and migration, whose
dream of self-determination was hijacked by the nihilistic vision of their
leader and turned to nightmare.
“We
lost something,” a Tamil artist in Jaffna, T. Shanaathanan, told me, “but we do
not know what. The war is over, but there is a kind of psychological warfare
now. Before, people looked at us with suspicion, with the feeling that you’re
Tamil, you might be a terrorist. But now they look at us as if we’re
nothing.”
*Aatish
Taseer is the author of the memoir “Stranger to History: A Son’s Journey Through
Islamic Lands” and the novel “Noon.” This article first appeared in the New York
Times.
