Tuesday, May 22, 2018

Annuity-based PPP can expedite infrastructure developments

Tuesday, 22 May 2018

Sri Lanka has primarily relied on public finance for the development of public goods and infrastructure. While running a big government which directly employs nearly 18% of the labour force, financing public infrastructure by the Government is a real challenge. As a result, Sri Lanka is highly indebted compared to its peer group (even among rating category – B). Needless to mention, that as a result of such financial constraints, our infrastructure and their contribution to economic development and growth remains subpar.

Our urbanisation rate according to official estimates is around 18.6%. This means that nearly 80% of population lives outside of main cities. To spur the economic growth, there is a greater need for connectivity via roads and railroads for transportation of passengers and goods in between cities and villages.

Public-Private Partnerships

Infrastructure development requires large upfront investment with a long gestation period for the recovery. Furthermore, pricing of usage of such infrastructure is a sensitive subject and it affects an investors’ returns on capital invested. Therefore, direct investment in infrastructure by profit motivated private investors are limited. However, due to limitations in the public finance, the governments around the world have invited private capital into infrastructure through various Public-Private Partnership (PPP) modalities. PPP models have evolved over the years to address surrounding issues and controlling the cost of such investments.

Primary risk of PPP is the uncertainty on the return on investments. Developers will have to face demand risk among many other risk variants. Apart from the sensitivity of demand to the pricing of such infrastructure, investors are exposed to political risk due to the essential nature of infrastructure facilities. The lenders cannot repossess assets in the case of distress, hence the lenders may demand tighter lending covenants and guarantees by the governments. As a result, the moderns PPP options structure in such a way that the originator, in most cases the government or government-linked entity assumes the demand and pricing risk. In this way, return expectation of investors rank in between equity and debt. Annuity-based PPP is one such structure, adopted worldwide.

Indian PPP model

for highways

India has adopted a hybrid annuity structure for construction of their roads and highways. The main feature of the hybrid annuity structure that the Government assumes the demand and pricing risk while the investor contributes to the majority of project financing and operation.

Selection parameter: Project Life Cycle Cost defined as Net Present Value (NPV) of the quoted bid project cost plus NPV of the operations and maintenance (O&M) cost for the entire operations period is the bid parameter. The bid is awarded to the developer quoting lowest NPV for project life cycle cost.
Cash construction support: Highway Authority, India (the granting authority) pays40% of the bid project cost to the concessionaire in five equal instalments linked to physical progress of the project. Concessionaire shall have to initially finance the balance 60% of the project cost through a combination of debt and equity. Developers may establish Special Purpose Investment Vehicle for this purpose.
Annuity payments: The concessionaire will receive semi-annual annuity payments from the granting authority (Highway Authority, India) on completion of the project for the balance 60% of the final bid project cost. The annuity payments have been aligned with typical revenue profile for highway projects. Interest costsare built into the annuity on reducingbalance basis of final construction cost. This is typically calculated at a premium to bank interest rate (Returns stay between debt and equity).
Operations and Maintenance (O&M) cost: The Authority will pay the agreed O&M payments to the concessionaire along with annuity. Concessionaire shall remain responsible for the maintenance of the project till the end of the concession period, which is typically 15 years.
Toll revenue: Toll collection shall be the responsibility and revenue of the Highway Authority, by this, investors will not be exposed to demand and pricing risk.

Indian model significantly reduces the burden of the Government while securing the project upfront. Annuity-based PPP contracts are not considered as a debt. The annuity model ranks in between debt and equity in the risk profile. This allows the government to allocate limited resources more effectively and channel budgetary allocation to needy sectors such as education and healthcare

Annuity model

The variants of annuity model could be utilised in other sectors such as development of public transport, buildings, water and sanitation facilities where it requires a large upfront investment for the construction. This is quite similar to purchasing a vehicle on operating lease, it allows the user to use the facility from the beginning without the upfront investment. The ownership of the assets in this case is not a concern as long as the assets is available for satisfying the utility of the final consumers. The annuity model significantly reduces the uncertainty and reduces the cost of financing such projects. It allows the government with budgetary restrictions to build infrastructure without leveraging its books.

PPP framework

Sri Lanka needs a clearly defined PPP framework for attracting investments into the infrastructure sector. The PPP division created within the Ministry of Finance is an important step towards developing such a framework. The existing procurements guidelines created in the late ’90s requires amendments within the prevailing legal framework in order to accommodate different variants of PPP.

The country has unattainable fiscal targets given our large investment requirements in the development of infrastructure. We will be able to provide a cushions to the budget if we can develop a workable PPP framework which allows different PPP modalities. Annuity-based PPP will eliminate most of the risk investors don’t want to assume when they commit large sums in an uncertain environment and it allows the Government to fulfil its promises to the people by providing the key public goods and infrastructure.

(The writer is a CFA charterholder; capital market specialist and Certified FRM. The views and opinions expressed in this article are those of the writer and do not necessarily reflect the official policy or position of any institution.)

What Are We Borrowing For?

By Ranil Senanayake –MAY 23, 2018

Dr Ranil Senanayake

In the current tussle for political credibility, borrowing money for ‘development’ is equated with success. All politicians laud ‘development’ without any idea of what it means. The question ‘what is development’ was asked as early as February 1978, but our ‘leaders’, from that time onwards never had a answer and are still stuck in the same old rut of blind consumerism, enriching themselves and their cronies while getting the population deeper and deeper into debt.

Meaning of Development (1978)

Development and progress are words that we are very familiar with and rightly so. As a nation all our hopes and aspirations are centred around the promises attendant on these processes. Yet recently there have been some questions on the values of ‘development’, and as in every controversial issue, the battle lines have been drawn. the combatants are, as is usual in these affairs, mostly from developed countries. the people of developing countries, more often than not, are mere witnesses to these esoteric exchanges. I do not intend to imply that these arguments are not valid; rather I would like to draw attention to the fact that often both points of view have their references deeply rooted in ‘developed’ or Western technological thought.

Development in the context of the current usage of the word certainly seems wedded firmly to Western technological thought. Whether we use it to describe an economic order or a social order, the roots are the same. e word development carries other connotations

in the context of present usage. It suggests that the country to be ‘developed’ is some way inferior to the model to which it aspires to become. the point here is: inferior by whose standards? To an industrialist from a Western country, a poor village in the third World does indeed need to be developed. A view, that will more often than not, be held by the rulers of the same country. To quote Richard Gott (CDN 1978).

“With the formal ending of colonial rule in all three continents of the third World, political independence was granted a tiny elite trained not to question the framework within which the world economy operated.”

It is this elite that laid the foundation for education of people in those countries, thus the value system operating and transmitted was certainly not endemic. With this perspective in mind, lets us attempt to look at ourselves.

We in Sri Lanka are continually talking about development. I believe that in the end this merely means an increase in industry and consumerism. It most certainly could not refer to a cultural or a philosophical development.

A country in which a major part of her population comprehends philosophical concepts that are addressable only by a minority of scholars in the West must certainly be, in comparative terms, more developed. An argument could be made that we also do not need to be more developed in our agriculture. Does an agricultural system that does not rely on any form of energy subsidy, other than biological energy, need to be ‘developed’ so its productivity becomes reliant on subsidized energy?

In the so-called developed world active research is under way for systems which are not subsidised by fossil fuel. We have it – and yet want to disrupt it in favour of energy intensive agricultural practices. Could this trend be attributed to the fact that most of our scholars are trained to look at problems in a purely Western technological perspective? Of course, all of us want to utilize our training for national good, but we should be careful and try to objectively evaluate the long-range repercussions of increased energy dependence.

Hartford Tomas (CDN 1978), who is a proponent of third World development, comments on the help given by developed countries to the ‘to be developed countries’:

“The philosophy of development from the grassroots comes up from the professionals, in Robert McNamara’s annual speeches and in the work of Schumacher’s intermediate development group.”

Well now, with all due respect for this illustrious gentlemen, I submit that the grassroots existed long before Robert McNamara’s discovery of them, and that if one reads Schumacher’s Small is Beautiful, one gets the distinct impression that Dr. Schumacher took many beautiful things from so called ‘underdeveloped’ countries. I do not mean to belittle the great words of these scholars, but wish to point out that they are addressing the developed world. So then, what help do we need from the professionals? To tell us what we already know about ourselves in ‘developed jargon’?

So we are still confronted with the dubiousness of the meaning of development. It would seem bizarre indeed if it transpired that we have been developing for the past 30 odd years mainly in a Western technological perspective. Some indication of our development can be addressed if we look at these questions in terms of the goals identified by those who describe the path. One of the standard answers to the development question is: the goal is economic growth. On this point Prof. Dudley Seers says, “in fact, it looks as if economic growth may not merely fail to solve social and political difficulties, certain types of growth can actually cause them”.

An important question is: who accepts responsibility for the results of this monomania for economic growth? Are we, by changing the value system, creating an artificial need for goods and services non- essential to our well-being as measured by any endemic standards? It may be useful to reflect again on a statement by Prof. Seers: ‘the social barriers and inhibitions of an unequal society distort the personalities of those with high incomes no less than those who are poor. Trivial differences of accent, language, dress, customs etc. acquire an absurd importance and contempt is engendered for those who lack social graces, specially country dwellers’.

Now let us take a case-in-point. Last week in the suburbs of Colombo, five youths were picked up for theft by the police. they each had on them at least Rs. 1000 worth of apparel (imported shirts, imported trousers, imported wristwatches, imported socks). their occupation? they were unemployed. How did they earn the money with which to buy the goods? they stole produce and other sellable items from the village. What was their need? they had to maintain their status (tathwaya). Is this development? How did these values come about? A.M. Hocart, who was the head of the Ceylon archaeological survey, wrote some poignant words that bear relevance to these phenomena.

How did a Multi billion dollar project find its way into the dustbin ? Exposure by Upul Jayasuriya chairman of Investment Board who resigned !

(Lanka-e-News – 22.May.2018, 10.50AM) Believe it or not ! Reports of a huge multi billion US dollar project for the country’s benefit had been thrown into the dustbin by some two penny half penny junior lawyers of the Attorney General’s department after being signed by them . Lawyer Upul Jayasuriya P.C. who resigned from the Investment Board which is the nerve center inviting foreign investment has via the letter (that is appended ) following his most valuable appraisal of the situation exposing the sorrowful state of affairs in the country which led to a US dollar 2000 million capital fund that was received going down the drain , has questioned what measures are going to be taken to remedy this colossal blunder ?

The text of his letter is hereunder. ….

Whither FDI in to Sri Lanka?

How did a Multi billion dollar project find its way into the dustbin.docx by Thavam on Scribd

MANGALA INVITES MR FOR DEBATE ON LOAN REPAYMENTS

Zahrah Imtiaz-Wednesday, May 23, 2018

Finance and Mass Media Minister Mangala Samaraweera challenged Kurunegala District MP, Mahinda Rajapaksa to a public debate on the country’s current debt and economic situation.
The minister who completed one year since taking over the ministry said he won’t bring up the corruption and other crimes.

“As a former Finance Minister himself, he should be able to debate this with me.
“The economy has come a long way since he was Finance Minister”, Samaraweera said addressing a media briefing at the Ministry yesterday.

Refuting allegations made by Rajapaksa on the country’s debt, the Finance Minister stated in the next 12 years, the majority of loan repayments came from loans taken before 2015.

In 2019, the government will face a Rs 4.2 trillion in debt repayment, 77 percent are loans from the Rajapaksa era. Of this, Rs 970 billion was only taken after 2015 and 48 percent was to repay earlier loan instalments, he explained.

In 2020, the government will have loan repayments to the tune Rs 3.7 trillion (77 percent from the Rajapaksa era) and in 2021, it will have to pay Rs 3.4 trillion in repayments (83 percent from the Rajapaksa era).

The minister noted that his government had also faced a continuous drought and other disruptions to government but they have also scored many an economic victory in the last three years.

The Opposition has been harping about an unbearable cost of living and people have started to believe this lie told so many times. But in reality, the cost of living today is much less compared to that of 2014 (during the Rajapaksa regime), the minister said.

He noted that the price of diesel, petrol and gas was much lower than during the Rajapaksa regime. In the first 100 days of the Yahapalanaya government, the salaries of government servants were increased substantially- to be specific, a 107 percent increase will be seen by 2020 (when compared to 2014).

The Minister went on to further highlight the prices of essentials such as: white rice from Rs 78 in 2014 to Rs 80 in 2018, white nadu from Rs 88 in 2014 to Rs 90 in 2018, flour to be Rs 97 in 2014 to Rs 89 2018, price of potato from Rs 108 to Rs 100 in 2018, Big onion from Rs 90 in 2014 to Rs 85 in 2018, dhal from Rs 170 in 2014 to Rs 145 in 2018, a can of tuna from Rs 230 in 2014 to Rs 228 in 2018. Sprats however increased from Rs 504 in 2014 to Rs 750 per kilo in 2018.

“Some have increased slightly but most when compared to earlier have not increased”.

The minister said over the last three years they have laid a strong foundation for a vibrant economy. Government tax revenue in 2014 stood at 10.3 percent was increased to 12.6 percent in 2017. In 2017, overall government earnings rose to 13.8 percent.

Government expenditure in 2017 was brought to a manageable 19.4 percent and since 1992 for the first time in 2017, the budget primary balance reported a surplus.

“The Government will be able to hereafter cover all recurrent expenditure on its own”.

2017 was also the year with the 4.2 percent unemployment rate, the second lowest rate in history. The government has also increased the Samurdhi expenditure from 3.1 in 2014 to 3.4 at present. “In 2018, we were able to obtain the status of an upper middle income country. With a per capita income of USD 4,065”, said the minister.

“The Poverty Index in 2012 which was at 6.7 percent was also reduced to 4.1 percent in 2016.We scored these victories with a heavy debt burden,” Minister Samaraweera said.

He said the government hoped to increase the allocation for education to 6 percent of GDP by 2025 and health expenditure to 3.5 percent of GDP in the next few years.

Gota should appear in Court, if not guilty - Mangala
Zahrah Imtiaz

Why is Gotabhaya Rajapaksa spending millions on lawyers to get injunction order to prevent his arrest? asked Finance and Mass Media Minister Mangala Samaraweera yesterday.

“If he is not guilty, he should appear in court,” he added. Responding to remarks made by Gotabhaya Rajapaksa that the former was scared of him, Minister Samaraweera said, “Yes I am and it is not only ‘I but many in this country are. I personally know what he is capable of”.

Addressing a media briefing at his Ministry yesterday, the minister read the list of cases in court the former Defence Secretary is suspected to have been involved in.

He read: According to Police reports, Rajapaksa is suspected to have intervened in: the alleged facilitation of an irregular diplomatic passport for Vinayagamoorthy Muralitharan alias Karuna Amman, in the alleged abduction and assault of Nation editor Keith Noyar by army intelligence officers, in the alleged murder of Sunday Leader editor, Lasantha Wickramatunga by Army Intelligence Officers, for the alleged assault of Rivira editor Upali Tennekoon by Army Intelligence Officers, for the alleged abduction and disappearance of journalist Prageeth Ekneligoda by Army Intelligence Officers in the alleged Welikada massacre of 26 prisoners and for the alleged shooting of pubic protesters in Weliweriya in 2013 which led to the death of three civilians.

“We are not making unfounded allegations,” the Minister said.

“These Army officers who had no enmity towards these people. It is very clear that they were following orders,” he further said.

“I can clearly state that it was Gotabhaya Rajapaksa behind this, the man we should all fear”. With regards to corruption, he noted Rajapaksa’s alleged involvement in the Avant Garde deal, the D.A.Rajapaksa memorial and the MiG deal which has an astounding USD 7.8 million allegedly being stolen through a shell company in England.

“His parents should be commemorated but not with alleged stolen money. If they were alive, they would be very disappointed that their children did this,” Samaraweera said.

Samaraweera also refuted allegations made by Rajapaksa that he went to meet the latter during the last Presidential election.

“In October of 2014, the Rajapaksas including Gotabhaya Rajapaksa asked to meet me.I told them to come meet me if they wanted and Mahinda Rajapaksa came to my house,” he said.

“They allege that the Prime minister too has crimes, but he never hid. When Batalanda came up, he faced the Presidential Commission. Similarly, when he was called before the Bond Commission, he faced that too, the minister said.

A Führer Calls in Sri Lanka

Mahinda Rajapaksa presidency ended but Gotabaya’s shadow state persisted. It was cemented too deep. It held on to its group mind.

by Nicholas Salmanovitch Rubashov- May 22, 2018

( May 21, 2018, Colombo, Sri Lanka Guardian) In the crucible of chaos, there is a simulated search for a strong man, a ‘Führer’ to take us to greatness, to preserve our culture, our values.

Hoopla is a European carnival game where competitors throw hoops around pegs. On Sunday 13th May 2018 Gotabaya Rajapakse played ‘Hoopla’ at the Shangri la. He put the hoop round the peg – the ‘Presidential Candidacy of the Pohottu party.

The hoopla at the Shangri-La last Sunday suggested that there is a strong and substantial body of thought in our polity, firm in its conviction that we are in need of a strong man, a man of action a man who delivers.

Last Sunday Gotabaya Rajapakse delivered two messages. The first was to us – ‘we the people’. He defined our problem for us. He told us that we are too infantile to understand our problem. So, he explained what our problem was.

Our problem was structural. Structural problems called for structural solutions. He was kind enough to present the first person plural point of view. We must make structural changes to the manner we think, to the manner we address basic economic issues etc.

Now, you must remember that he defined the structure of the problem and offered us the structure of the solution. Now what is the solution?
Aha! Not so fast my friends. Solutions will come after 2020 when I am on the saddle on the white stallion – the presidency.

Right now, this is the ‘Viyathmaga’ – the erudite way to place the bridle on the beast.

The second message was for his Brother – the former president who restricted by the 19th amendment must propose a candidate for the presidency to his undoubtedly sizable constituency that awaits his counsel, caution, direction and instruction.

Look around you! In to this place that bears the brand and the name of the mythical kingdom of abundance and plenty- the Shangri-La I have summoned the barons of industry, commerce and finance, the brave soldiers of the realm, the thought leaders of the mother land. Behold the sight. Digest, how docile and attentive they are!

Make no mistake. Here is a man who has a clear and a tight grip of conceptual power. He knows the difference between the government and the state. The government changed hands. The state moves on. He knows how it works. He knows, because he once ran it single handedly under the dispensation of his brother who presided over a fractious government listening to the smooth ticking of his watch never quite realizing the full genius of his brother- the watchmaker.

At the Shangri la on Sunday, he discovered how the watch maker assembled the intricate parts of the watch. And more! Mahinda heard the wake-up alarm.

The Shangri la gathering was a prelude to the possibility of our society being subject to an oligarchic collectivism. The term was coined by George Orwell in his novel 1984.

It describes a society that was already in the making before it was rudely intercepted by the change on 8th January 2015.

Then the new rulers decided to open the vaults of the central bank and all hell broke out. Greed to carve out political territory, mismanagement and sheer imbecility in governance prevented the dismantling of the edifice that was in place.

In the preceding five years – the post war years of development leaps and construction booms, government institutions, media and corporate interests moved under the control of a handful of individuals, linked together, collaborating to direct, regulate and benefit from each other and derive its share of profit, from the toil of the silent many- ‘we the people’.

It is all about control. It is control, that this government lacks. Although the government changed, the state mechanics remained intact.

Mahinda Rajapaksa presidency ended but Gotabaya’s shadow state persisted. It was cemented too deep. It held on to its group mind.

What we saw at the Shangri la is a phenomenon – a modern day Bonapartism. A determined man wants to replace the post-independence comprador class with post 2005 rent seekers wealth extractors and wealth creators of exceptional talent.
They are distinguished by their willingness to serve the state. Mind you, they will serve the state not the government. And you know who ‘State’ is.
The mainstream political parties have disintegrated in to power seeking, vote gathering machines operated by political freebooters.

As Hannah Arendt has painstakingly explained in her elegantly insightful prose, totalitarian movements are possible “wherever there are masses who for one reason or another have acquired the appetite for political organization.”

That was the spectacle we watched at the Shangri-La on last Sunday. What we saw gathered in the hugely opulent, hugely accommodative epitome of luxury was a “great flaccid body destitute of political education, almost inaccessible to ideas capable of ennobling action” ready to listen to a new ‘Pied Piper.’

In our current context, we should pay heed to Hannah Arendt one of 20th centuries great intellects who survived fascist tyranny and authored the classic political tract- Origins of Totalitarianism’.

As Hannah Arendt explains, masses are not held together by a consciousness of common interest. They do not have the capacity to either define their goals or to articulate them.

The ambitious manipulator and strong man not only notices this reality but takes in to account their sheer numbers, stupidity and indifference as factors that make up the equation of total control.

This indifferent segment of our society has begun to wake up after the hoopla in the Shangri la.

Those “ Kapuwatth Kola’ UNPers and ‘Kapuwath Nil” SLFPers on both sides of the barricade waiting for the crumbs off the patronage table do not make or unmake regimes.

It is the party neutral, indifferent majority who bring about regime change. They alone constitute the majority that matters.

This happened before in other lands. That it will happen here, is now a real possibility. There may arrive a day, when parliament will wake up to discover its total and absolute disconnect with the great mass that is apathetic and indifferent.

Then, those in parliament can go home with the assurance of the ‘Strong Man’ that he will take upon himself the terrible and horrible responsibility for the conduct of public affairs in an orderly manner.

It is in that sure knowledge, that the merchant princes marked their presence in the front row at the hoopla at the Shangri la.

Chinese Weddings Fiasco: Shouldn’t John’s Advisor Felix Resign Over Questionable Business Links? – Colombo Telegraph’s Questions For GLL

MAY 22, 2018

In response to two articles published by Colombo Telegraph on alleged acts of corruption involving Felix Rodrigo, a ‘Senior Advisor’ to Minister of Tourism Development and Christian Affairs John Amaratunga, Green Leaves Leisure – the company at the centre of the Chinese weddings fiasco – has sent the following statement.

“Green Leaves Leisure is a legally established, registered travel & tourism company that has independently developed the concept of ‘The Royal Wedding ‘ in Sri Lanka for 100 Chinese couples.

This concept captured the imagination of the chinese wedding market. The chinese television company CCTV gave wide coverage to this event. Resulting in the generation of two more similar events in the coming year.

This chinese wedding saw 400 tourists visiting sri lanka & generated revenue to hotels, restaurants & retail establishments. And put Sri Lanka on the map as the destination for off-site weddings.

It should be specifically mentioned that, Green Leaves Leisure (GLL) did not canvass the support of Sri Lanka Tourism Promotion Bureau (SLTPB). But facilitated the inclusion of the Ministry of Tourism & the Ministry of Megapolis out of professional curtesy to the industry and with a view of promoting Sri Lanka tourism.

The company has at no time acted in a manner to warrant an investigation nor have we been informed of such an inquiry.

Therefore it is erroneous to intimate that these Wedding events are diverted to Green Leaves Leisure by SLTPB or the Ministry of Tourism. As this was a concept exclusively developed by GLL.

In fact Green Leaves Leisure has committed to bring in 10,000 tourists into the country monthly. These tourists will be fed in to existing Hotels, Restaurants, Tour guides, Transport, Retail Establishments and Airlines.

Green Leaves Leisure does not operate any of these ancillary & complementary clusters.

It is interesting to note that unlike the Royal Wedding Event which brought in 400 direct tourists without any sponsorships from Sri Lanka Tourism Promotions Bureau’ several other events organised by private corporations have been underwritten or sponsored without any quantifiable benefit to the country in terms of tourism promotion.

Most recently, The Power Boats Event down south, sponsored by SLTPB. The Choir Games (run by a private profit making company) underwritten by SLTPB, The Sound of Music Production an event by a development consortium as part of it’s local promotions for their mega development project.

And finally the Black Tie Dinner hosted at the Savoy Hotel for the British Travel Writers Association in London underwritten by SLTPB for 20 million rupees which did not generate a single article on Destination Sri Lanka.

The ethos of Green Leaves Leisure is to be complementary & work together with all stake holders to promote Sri Lanka as a destination of choice in the international travel market.

Currently we are in the process of finalising preferred partner hotels to launch Sri Lanka at the Destination Business Conference again as an independent Travel & tourism company without any backing or support of SLTPB or the Ministry of Tourism.

We deny categorically that there has been any money siphoned out from SLTPB or the ministry to Mr. Felix Rodrigo, Mr. Harindra Rodrigo or to Green Leaves Leisure or that an inquiry has been initiated from the prime minister’s office. ”

Colombo Telegraph response

While standing by its story, Colombo Telegraph wishes to pose several questions to Green Leaves Leisure. We expect Green Leaves Leisure on any party representing the company would respond to the following questions raised by the Investigations Desk of Colombo Telegraph.

Felix Rodrigo

1) What is the connection between Harindra Rodrigo, the owner of Green Leaves Leisure and Felix Rodrigo, a “Senior Advisor” to the Ministry of Tourism Development and Christian Affairs?

2) If Green Leaves Leisure (GLL) “did not canvass the support of Sri Lanka Tourism Promotion Bureau (SLTPB), but facilitated the inclusion of the Ministry of Tourism & the Ministry of Megapolis out of professional courtesy to the industry and with a view of promoting Sri Lanka tourism,” why did Mr. Udaya Nanayakkara, former Chairman of the SLTPB receive a directive to pay Rs. 6 million to your company, following the first Chinese wedding event in Colombo ?

sugar puts Tea industry in a dilemma

2018-05-23

It was last February that the story of 53 tea factories, which allegedly adulterate tea with sugar during production, was revealed. The raids on these tea factories had been carried out by the Sri Lanka Tea Board (SLTB). The Minister of Plantation Industries of Sri Lanka Navin Dissanayake said that any culprits found guilty would be punished severely. This was revealed through ‘Sathya Gaveshana’ ( Exploration into the truth) an expos article which appeared in our sister newspaper ..Lankadeepa. But, the SLTB has to now check whether it adhered to the proper procedures when doing its research. When it comes to regulations relevant to the tea industry, why does the SLTB, being the legal authority, become so powerless? This week’s exploration is about the much talked about story in the tea industry.

This investigation, that was done under the leadership of the former SLTB Chairman Rohan Pethiyagoda, is the first of its kind in the history of Sri Lanka tea. However, he retired from service one month after this investigation; termed as High Performance Liquid Chromatography (HPLC). The position he vacated was filled by Lusil Wijewardena, no stranger to the tea industry. He was entrusted with the task of taking action against the allegations levelled against the 53 tea factories. But there emerged another problem because the alleged factory owners’ stand was that they aren’t guilty.

Minister Dissanayake said no quick decisions could be made and it would take about three months before arriving at a conclusion

They have taken steps to challenge the investigation, said to have been done in keeping with a pure scientific method. The minister in charge later afforded an opportunity to the factory owners to express their views. Accordingly, the minister had a discussion on March 29 with the these tea factory owners and the officers of the SLTB. As a result, these factory owners got the opportunity to express their views in writing. But the SLTB encountered an unexpected situation; they had to verify the outcome of the investigation they had already carried out.

In the meantime Janatha Vimukthi Peramuna (JVP) parliamentarian Sunil Handunnetti made a written request to Minister Dissanayake to publish the relevant list of factory owners alleged to have adulterated the tea during manufacturing. His request was to reveal at least the names of 27 factory owners among the 80 factories who have produced tea by reasonable means. When inquired by journalists, a senior officer of the SLTB said that it was not possible to reveal the names of those concerned because no final decision had been arrived at thus far.

However, Pethiyagoda, who was in the forefront of this investigation, is no more with the SLTB. The tea board does not seem to be interested in the relevant research methodology as well. When journalists made inquiries in this regard, Minister Dissanayake said no quick decisions could be made and it would take about three months before arriving at a conclusion. This scenario highlights a negative aspect associated with the tea board. The SLTB has a research institute as well and should be in a position to take responsibility with whatever activities it carries out. The counter allegations made by these factory owners have been aimed at distorting the truth. If this is how the SLTB takes responsibility it’s no shock to see that ‘Ceylon tea’ has become a subject of controversy.

When it comes to the tea industry there are many processes which are connected to it. For instance a number of activities such as tea production, export, brokerage, import and packing are involved in the tea industry. In the event of stemming a defect associated with any process, it is inevitable that the entire tea industry will be affected adversely. Given the present crisis it seems that contributions have

been made by the tea plucker to the labourer to intensify the problem in the tea industry. The Tea Small Holders’ Association claims that it is dumped in a chaotic situation when there is a tug-of-war between the SLTB and the tea factory owners. According to them, the main reason for this competition in the market is that despite there being an increase in the number of tea factories it has not been in proportion with the production which has remained low. In reality it is the tea small holders who are in danger because they have to see to the welfare of 2 million dependents. Therefore, it is the responsibility of the authorities to take note of their grievances.

There are various differences of opinion among the business community and the groups who are connected to this industry. These differences were highlighted in the media. However much of these differences are associated with wrong opinions, which have led to arguments. The best example for this is the tea board of neighbouring India. The Tea Board of India (TBI) acts as a facilitator to help people identify real tea from the tea that has been adulterated with colouring. In this aspect the TBI adheres to a rigid policy. Various strategies have been introduced to identify the real products. These strategies not only help the consumer to avoid buying bogus products but also assists the authorities to nab the culprits. They publish newspaper advertisements in this regard. India in comparison to Sri Lanka reveals the truth about the team that’s produced in her country. India makes it a point to make it known to consumers that the future of a tea brand depends solely on honesty and trustworthiness.

It was last year that the tea industry in Sri Lanka celebrated its 150th Anniversary. But, the negative news about the defects in the island’s tea has spoiled the anniversary celebrations. Sri Lanka should not forget that it is facing a challenging situation when other players in the tea market like Kenya and India are doing well. Sri Lankan tea is bought by countries like Russia, Iraq and Iran. It is not very healthy for the SLTB to take such an irresponsible stand because there are so many dependents. It should reveal the truth about the wrong doing of the factory or otherwise accept defeat. If this isn’t done it is the ‘Ceylon Tea’ brand name that’ll suffer because as of now the country’s tea is termed ‘impure’. This is a time when the entire tea industry must remember that old Sinhalese saying, ‘an act of washing clothes and dipping them again in muddy waters’.

‘Cultivators are in trouble’ - Kularatna

Association of All Ceylon Tea Development Small Tea Estates Alliance Chairman K.L. Kularatna said that tea is presented to the world saying it’s ‘Pure Ceylon Tea’. “It will damage to the reputation of tea. This is an industry which paves the way to earn the living of 2 million people. There may be only six hundred factory owners. They are engaged in unnecessary competition to earn profits. Now they have a harvest of about three to four hundred kilos from each acre.

This is not sufficient. Factories are increased while the production of tea is going down. Then the tender leaves are not sufficient to meet the capacity of the factory. Then they make various methods to increase production. Small tea owners are doing this for their living. We are in trouble due to the work of this small group. Most of the investors are local people who have invested more money on this tea industry.Tea factory owners can change this business, but we can’t do it. We are experiencing a major crisis.

“We wanted to conduct this test secretly”

The following are excerpts of an interview done with the former Chairman of Sri Lanka Tea Board Rohan Pethiyagoda.

Q What sort of test was conducted by SLTB in connection with blending tea with sugar?

The issue of tea being mixed with sugar has been prevalent for sometime. I thought of a new method to verify the truth of this charge in a quick way without waiting for the processing of the black tea. Various properties of sugar are subject to several chemical changes during heating. Any difference detected in the tea leaves during the process of drying, after grinding, proves that the tea has been mixed with sugar. But some were of the view that this test could be done only with black tea and it didn’t surface in the mind of anyone that this test could be easily done at the factory premises. When tea leaves are put in water before they are put in the oven at the factory, the tea begins to dilute and will taste sweet, if sugar has been added. This is a simple and easy method of testing whether there is sugar in tea.

Q But the alleged factory owners maintain that sugar, to a certain degree, is an inherent property of tea itself. How do you explain this view?

It’s true that sugar is naturally found in tea leaves and also in other kinds of leaves. But this sugar is present in fructose form and includes glucose and sucrose. This is less than one percent of the sugar which is produced by the leaf itself. However there is no possibility of increasing this minute degree of sugar during the drying and grinding stages.

We deployed them in groups of two according to the list of factories. Instructions were given to take samples and transport them in cabs while keeping the mobile phones off. What was happening was not known to them - Rohan Pethiyagoda

Q There is another allegation that this test has been conducted without the direct involvement of SLTB.Your comments.

We wanted to conduct this test secretly. We didn’t even use the SLTB’s vehicles as drivers would come to know about our task. This would have made the factory staff take every precaution to stop their misconducts. I made arrangements to bring the relevant officers to the auditorium of the Tea Research Institute in Kottawa, Galle by inviting them to a so-called farewell party on my retirement from the SLTB.

We deployed them in groups of two according to the list of factories. Instructions were given to take samples and transport them in cabs while keeping the mobile phones off. What was happening was not known to them.

If they had known about our purpose their abuses in the processing of tea would not have been detected.

Q Why is sugar added in the processing of tea?

Ferrous sulfate, potassium permanganate, sodium hydroxide and sugar are added to give a black colour to the tea. Black tea is expensive and Arabian countries prefer this type of tea. Normally processed tea is grayish in colour. The other thing is that sugar helps in the process of fine grinding. The third factor is the weight. A kilo of sugar costs only Rs.100 while a kilo of tea is Rs 600-700.

Q Some accept that they mix sugar with tea and also argue that there is no harm in this blending process.

A scientist at the Tea Research Institute (TRI) in 1971 prescribed as acceptable a small amount of sugar to be mixed with the tea. This was included in a research paper. However some factory owners have taken it as a recommendation of the TRI. There are easy and profitable ways of manufacturing tea. But it should comply with the legal requirements.We assure the quality of our tea when dealing with the international market. If the real sate of our tea is revealed it will badly affect the produce from Sri Lanka. Other main exporters like India and Kenya follow strict procedures in the operating of their tea industries.

The mixed tea tends to develop a certain fungus three months after the tea auctions and becomes unsalable. These factory owners should realise that they are causing a bad global impression when they do this to our tea.

Q TRI is preparing to do a review of this particular test. Do you agree to such a review?

For our tests we brought down samples of withered tea leaves and leaves of the later stages to Colombo. These samples were brought by the tea inspectors employed under the Commissioner of Tea. They were sealed and signed samples and were also given to the factory owners to avoid any possible disputes.Therefore the allegation of blending tea in Colombo is not true. There was transparency when these tests were done. If there is any suspicion a sample could be retested.

Private Tea Factory Owners’ Association behind issue

Following are excerpts of an interview done with a factory owner who is shrouded in allegations.
Q What happened really?

That is the general methodology used by SLTB. We are harassed first and then slapped with a fine of Rs.50,000 or 100,000. The factory owners pay the fine because they can’t bear the oppression. The SLTB is an institution where bureaucracy reigns supreme. The main question is whether they have done this to stop the malpractices in the tea industry or whether their aim is to be in the good books of the Minister. Even the officers of the SLTB aren’t aware of this methodology. Opinion is divided within the SLTB itself.

Q But, hasn’t it been proved that tea is adulterated with sugar?

The sugar level in the tea may fluctuate due to the climate, fertilizer and manner in which tea leaves are plucked. It is practically difficult to prepare a baseline. On the other hand, the chemical composition in tea differs from the places where the leaves are plucked. Tea leaves are put into the dryer after 2 hours of withering and rolling. No recent study has been done in this regard. The SLTB proved that the glucose content is more in the rolled leaf than in the withered one. These claims aren’t scientific because the carbohydrate content increases as soon as the leaf is put in the roller. The HPLC methodology is only a reading.

The SLTB should get involved in this and find out what’s happening. There is a big problem of labour in Sri Lanka - A factory owner

Q More or less, sugar in the tea may appear as fructose and glucose whereas there may be a slight presence of sucrose. Do you support the argument that there is no reason to increase the natural sugar content while drying and grinding tea leaf?

That is wrong. There is ample evidence of research to prove it. This person who is making this claim has no knowledge about botany. If that is so, this person should do a research and prove it. Really, the former chairman wanted to show that he is a big shot.

Q Do you accept the suggestion that the sealed tea sample test can dispel doubts?

That is useless. For instance the average value of blood samples should be known to see whether there is dengue. Comparisons are done like that. Here, there is no average value to be compared. What are here are his dimensions. That is not a definition.

Q Are there people who adulterate tea with sugar?

Yes. We have to find out why do they do so? The quality of the Sri Lanka tea is gradually declining. The SLTB should get involved in this and find out what’s happening. There is a big problem of labour in Sri Lanka. The people in the past plucked tea leaf every five days. Later these figures changed from seven to ten days. If mature leaf is adulterated with sugar then it will become wet. When we get 25 kgs. of plucked tea leaves by paying 6 dollars, the countries like Kenya pay 1 dollar and get 60 kgs of plucked leaves. It is useless boasting about ‘Ceylon Tea’ without having a means to survive.

The SLTB is an institution where bureaucracy reigns supreme. The main question is whether they have done this to stop the malpractices in the tea industry or whether their aim is to be in the good books of the Minister. - A factory owner

Q Do you say that there is no problem in mixing tea with sugar?

Really, there is no problem. Even though sugar is mixed, it will not remain as we boil the tea in a high temperature. For instance, this is not an act similar to mixing brick dust with chili powder. On the other hand, all types of chemicals are sprayed in the growing process until the tea leaves are brought to the factory after plucking. If there is nothing like that there is no need for the tea board to intervene. It is the ‘Brahman’ caste or the Private Tea Factory Owners’ Association which is behind this. In the chairman’s factory, 15,000 kgs of tea is not produced per month. Their factories are closing down on a daily basis. They who are unable to face the competition and are trying to close the biggest factories in Sri Lanka.

Q What did you demand from Prime Minister?

To start a scholarly discussion including the tea board and factory owners. We also asked to conduct a research with the Tea Research Institute. Now there are bogus tea plants all over Sri Lanka. The Tea Board must be committed to start genuine tea nurseries. But, they do not address these real problems.

‘It is baseless to make allegations’ - Ranasinghe

Sri Lanka Tea Factory Owners Association Chairman Harith Ranasinghe said that if sugar is mixed with tea, the weight and color change resulting in extra profits. “Then they can overcome others. Sri Lanka Tea Factory Owners Association is not going behind anyone. The Minister was informed in one voice by the Sri Lanka Tea Factory Owners Association to inquire into this as it is a disgrace to the name of Sri Lanka Tea, if such a things are happening,” he said.

‘Methodology needs to be examined’ - Edirisinghe

Tea Commissioner E.A.J.K Edirisinghe said that all 53 factories have already submitted reports on the production process of their factories. They are now being studied by the Tea Board. Their main concern is about the methodology applied by the Tea Board in the testing process. Therefore we are now reviewing our testing methodology.

Elementary my dear Cabraal, Dr. Indrajit tells ex-CB Chief

Wednesday, 23 May 2018

Akin to Sherlock Holmes saying, “Elementary my dear Watson”, Central Bank Governor Dr. Indrajit Coomaraswamy yesterday rebutted former Central Bank Chief Nivard Cabraal over the latter’s claim on Monday that foreign reserves at the end of Rajapaksa regime had been squandered by the Yahapalana Government.

Though not directly referring to Cabraal’s statement, the Central Bank yesterday said a misleading news item had been disseminated in relation to Sri Lanka’s foreign reserves and external debt servicing.

While stating that around $ 8.9 billion of borrowings by the Government were absorbed to

Central Bank reserves during 2015-2018, the article provides no consideration on the significant debt repayment effected through the utilisation of reserves during the period, which the Central Bank is obligated to as the official debt manager of the government.

The Central Bank stressed the need to identify not only borrowings but also the debt repayments in analysing how gross official reserves were utilised. See Page 8 for the full statement of the Central Bank.

Taj Samudra avoids releasing CCTV footing of Rs.20 million bribe-taking

May 22, 2018

President’s former Chief of Staff I. H. K. Mahanama and former State Timber Corporation (STC) Chairman P. Dissanayaka who were remanded over accepting a bribe of Rs. 20 million, were further remanded till 5th June by Colombo Chief Magistrate today (22nd)

Officials of the Bribery Commission had arrested Mahanama and Dissanayaka while accepting a bribe of Rs.20 million from an Indian businessman at Taj Samudra premises on 3rd May. However, a request made from Taj Samudra to make available CCTV footing at the time of the incident has not been granted informed the Bribery Commission to Colombo Chief Magistrate.

This was told by the Assistant Director General at the Commission to Investigate Allegations of Bribery or Corruption … Commission to Investigate Allegations of Bribery or Corruption when the case against Mahanama, and Dissanayaka was heard today.

The duo had asked for a bribe of Rs 540 million from an investor interested in acquiring a state-owned sugar factory.

Chinese Dream & “Splendid Pearl”

By W. Vishnu Gupta –MAY 22, 2018

W. Vishnu Gupta

The present leader of China Xi Jinpin became the General Secretary of the Communist Party of China in November 2012. Soon after that Xi announced what would become the hallmark of his administration. “The Chinese Dream,” he said, is “the great rejuvenation of the Chinese nation.”

He elaborated further; everyone has his or her own ideals and pursuits, in addition to this shared dream, “realizing the nation’s great rejuvenation is the greatest dream of the nation” Rejuvenating China, the Chinese dream will benefit the world with experiences for other regions and countries to follow and help establish win-win relationships among world players.

Chinese Dream stirs hopes and sets expectations for the Chinese in China. Internationally, particularly in developed western countries it provokes questions and elicits concerns. Sometimes these concerns borders around the warning of the dangers of self-fulfilling prophecies.

However, developing nations such as Sri Lanka must understand that the Chinese Dream differs from the American Dream. Xi Jinpin’s vision (Dream) expresses China’s collective aspirations –

International corporate strategist and investment banker Robert Khun explains that there are four parts to Chinese Dream.

1) Strong China (economically, politically, diplomatically, scientifically, militarily)

2) Civilized China (equity and fairness, rich culture, high morals)

3) Harmonious China (amity among social classes)

4) Beautiful China (healthy environment, low pollution).

In March 2013, Xi also emphasized that the Chinese Dream is a dream for peace, development, cooperation and mutual benefit for all. Therefore, it is connected to the beautiful dreams of the people in other countries. The Chinese Dream will not only benefit the Chinese people, but also people of all countries in the world.

Xi proposed taxonomy of five dimensions from which to analyze the concept of Chinese Dream – national, personal, historical, global and antithetical.

It is obvious under global prospect; the Chinese Dream will change the global landscape which was shaped by Western countries over the past two centuries with the help of industrialization. The new global landscape proposed by Xi is different; it will be established through international rules, dialogue, mutual respect and experiences of both developed and emerging countries. Simply put “Do as we do” principle in the West versus the Chinese principle of “Let’s do it together”. It is interesting to note that on the eve of Xi Jinpin’s historical visit to Sri Lanka on September 16th 2014, he referred to the island nation as “splendid pearl” in the Indian Ocean. I doubt that Machiavellian politician understood the real meaning, obviously Xi Jinpin did not mean the glorious past of “Swarna Bhumi Lanka.”

Chinese Dream and One Belt One Road Initiative

Soon after becoming the General Secretary of the Chinese Communist Party in 2012, Xi spearheaded a network of investments in grand scale to develop infrastructure to link China with rest of Asia and Europe. First to revive the old Silk Road that linked Asia with Europe. This initiative, popularly known as “One Belt, One Road” appears to be the initial instrument in achieving the Chinese Dream. Later in October 2013 Xi Jinpin proposed the Maritime Silk Road (MSR) initiative during a speech to the Indonesian Parliament. Maritime Silk Road is the maritime section of historic Silk Road that connects China to Southeast Asia, Indonesian archipelago, Indian subcontinent, Arabian peninsula, Somalia and all the way to Egypt and finally Europe.

It is clear from the China’s proposed Silk Road map that “Splendid Pearl” has a key geostrategic position to assume. If impetus of MSR is properly understood by the relevant political and administrative authorities of Sri Lanka; this unitary, sovereign island nation has the most advantageous and envious role to play in developing the Maritime Silk Road. This golden opportunity should not be squandered by the corrupt economic and political operatives of the country under different guises. However judging by the performance of the present government of co-habitation, it seems the government leaders; both President and Prime Minister have been very slow to capitalize from the opportunity offered by the Chinese with their MSR initiative.