High oil price, dollar strength and EM currency woes

Thursday, 14 June 2018 

The three most important global prices – oil, United States Dollar (USD), and US interest rates – have hit fresh highs. This is an unprecedented development. These prices don’t often move together, rather they move in opposite direction.

The long-term oil price direction is believed to be decided based on the relative strength of the USD, hence these two prices move in opposite directions. On the other hand, direction of US interest rates and underlying strength of US economy in general decides the direction of the currency. These collective actions in turn set the direction of the commodity market, including oil prices. However, synchronised surge in all three prices is uncommon and has added serious strain to the global economy.

It has been a busy week for the world’s three most powerful central banks with the US Federal Reserve setting the pace in a retreat from the era of easy money. When this piece appears in print, the decision would be known to the markets.

Three meetings within 36 hours of each other is expected to conclude with the Fed raising interest rates, the European Central Bank indicating its plan to cease buying bonds, and the Bank of Japan maintaining its massive stimulus program. Implication of these central bank actions are far reaching beyond the boarders and complicated.



The Fed action and emerging economies

It is noteworthy to observe the divergence of policies of central banks for almost half the global economy and three-quarters of the official currency reserves. It also threatens to intensify pressure on emerging markets, which are already unnerved by the withdrawal of US monetary stimulus. The Fed is in the lead of exit cycle, the ECB may anytime decide withdrawing after more than three years of quantitative easing due to the mounting optimism that the world economy remains on track for a solid expansion in 2018.

The Fed action is solely based on its focus; managing the domestic economy regardless of possible fallout elsewhere in the global economy. Emerging markets are at risk from higher US interest rates forcing up the dollar and prompting investors to shift money back to the US.

During the last few weeks, Turkey, India, Argentina, Indonesia and Mexico lifted their domestic policy interest rates to protect their economies, while Brazil again intervened to defend the currency. Amidst looming crisis, central banks of the emerging economies called on the Fed to be mindful of its actions.


Easy money era 

After the financial crisis in 2007/08, followed an extraordinary period of repressed volatility in financial markets, ultra-low interest rates, and dollar weakness unleashed another surge of capital flows to emerging countries, which tend to return to US at the first sign of trouble.

Empowered by exceptionally generous global financing conditions and quantitative easing by the developed world central banks, a number of emerging-market companies have resorted to external dollar borrowing, substantially increasing their financial vulnerability to higher interest rates and adverse USD movement.


Argentina

Inconsistent policy has worsened the debt problem and threat of currency depreciation in Argentina. The Central Bank of Argentina (BCRA) switched to an emergency mode in May by increasing the policy rate (the seven-day repo reference rate) by 675 basis points to an all-time high of 40.00%.

The decision marked the third rate hike within a short span. On 27 April, the Central Bank surprised markets by increasing interest rates 300 basis points from 27.25% to 30.25%; this was followed by another hike on 3 May, bringing the rate to 33.25%. The action temporarily helped to arrest the currency slide.


Turkey

Turkey is a classic example how conflicting ideologies can cause serious economic hardships. With twin deficits, Turkey was not in favour of raising its interest rates and forgoing its high economic growth (i.e. 7.3% in 4Q2017) in order to combat inflation which was running above the policy target and protecting its currency (Lira).  The Turkish lira has slid by over 25% YTD, the country was out of options and had to resort to orthodox monetary policy action, the Central Bank of the Republic of Turkey’s (CBRT) decided to raise interest rates by a massive 300 basis points at an emergency meeting in May and followed by another hike of 175 basis points. The CBRT also decided to simplify policy instrument choosing one-week repo auction rate as its policy rate.


Pre-emptive action by India and Indonesia

The Indonesian central bank (the BI) decided to increase their policy interest rates; 7-day Reverse Repo Rate by 25 basis points to 4.75%. The Central Bank stated the decision as pre-emptive, front-loading, and ahead-of-the-curve moves to strengthen stability, especially exchange rate stability against a higher than expected Fed Fund Rate (FFR) hike and increasing risk in the global financial market. The inflation forecast of 3.6%, is closer to the mid-point of the 2.5-4.5% inflation target. By switching to tightening bias, Indonesia sends clear signal to the markets that the bank will continue to prioritise external stability even if it weakens the growth outlook.

India observed a spiked in core inflation while softening food inflation. The country suffers more from the increased in oil prices. The central bank (RBI) decided to raise interest rates exiting from its softening cycle. The RBI action is viewed as a signal up front of its readiness to take preventive action and not repeated jumps in inflation and run on its currencies.


EM policy direction

Synchronised USD appreciation, international oil price gains and a Hawkish fed induced capital flight back from emerging markets, could pushed domestic inflation if accommodative policy is maintained. Turkey’s case having an accommodating policy while inflation being allowed to run higher caused severe loss of investor confidence and a spiralling effect on the currency, which was visible in the sharp Turkish Lira depreciation.

The US exit strategy and ECB’s gradual withdrawal of its stimulus programme has caused a reversal of the capital flows back to the developed world. The emerging market currency slide prompted by the developed world central bank actions have caused emerging market central banks to quickly resort to emergency monetary policy actions lifting domestic policy interest rates. Countries with twin deficits especially will be vulnerable such external shocks and should be prepared to high interest rates regime.

(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.)

200,000 Rohingya at risk of landslides as monsoon hits Cox’s Bazar

The Chakmarkul refugee camp is seen after a storm, in Cox's Bazar, Bangladesh June 10, 2018. Source: Kristiana Marton/Save the Children/Handout via Reuters 

By Max Walden | 13th June 2018

The Chakmarkul refugee camp is seen after a storm, in Cox's Bazar, Bangladesh June 10, 2018. Source: Kristiana Marton/Save the Children/Handout via Reuters

HEAVY rains have lashed the massive Rohingya refugee camp in Cox’s Bazar, Bangladesh as the monsoon season begins, putting hundreds of thousands of people at risk of severe flooding and landslides.

The United Nations Refugee Agency (UNHCR) said on Tuesday that “nearly continuous” rain since the weekend had already seen 37 landslide incidents causing several injuries and killing at least two people including a two-year-old boy.

Speaking to Asian Correspondent by phone, Save the Children’s Communications and Media Manager in Cox’s Bazar Daphnee Cook said that “it’s been raining pretty much constantly for the last four days.”

“What’s happened is that in three days the camps have gone from sandy clay to mud and lakes. It’s completely inundated,” she said.

SEE ALSO: Rohingya refugees demand justice as Security Council visits Burma, Bangladesh

The UN estimates based upon aerial mapping that 200,000 people are still at risk of landslides and floods and require relocation to safer areas. Bangladesh’s government is working with aid agencies to relocate an initial group of 100,000 Rohingya from the camps, Reuters reported.

“Sodden and unstable hills have collapsed over the weekend, destroying latrines. At lower levels, water from flash floods is washing over latrines, carrying sludge through the camps,” said Sanjeev Kafley, head of Cox’s Bazar Sub-Office for the International Federation of Red Cross and Red Crescent Societies (IFRC) in a statement.

“We’re already seeing increases in acute water diarrhoea, and the risk of an outbreak of waterborne diseases is now a serious likelihood.”

A child wades through mud after a storm at the Chakmarkul refugee camp, in Cox’s Bazar, Bangladesh June 10, 2018. Picture taken June 10, 2018. Kristiana Marton/Save the Children/Handout via Reuters

The main road through Kutupalong has already been flooded and is blocking vehicle access to much of the settlement, requiring repair from the Bangladeshi army. This has hindered aid efforts as agencies are forced to enter the central and outer areas of the camp on foot.

NGOs have for months warned about the monsoon worsening the humanitarian crisis facing Rohingya refugees. In February, the UN warned of an impending “crisis within the crisis” at the Bangladeshi camps, which is now the world’s largest and most densely populated refugee settlement.

There were 915,000 Rohingya refugees living in settlements and host communities in Cox’s Bazar as of May 24. Around 700,000 of them have arrived since Aug 25, 2017, when attacks by the Arakan Rohingya Salvation Army (ARSA) against security outposts sparked military and vigilante reprisals against Rohingya communities across the Rakhine.

Mass killings, sexual violence and targeting of Rohingya villages for arson has been described by many international observers as ethnic cleansing and even genocide.

SEE ALSO: Rohingya lawyer granted $1.1m Aurora Prize

Bittersweet Eid

Since Saturday, strong winds of up to 70 kilometres per hour along with torrential rain has already impacted 2500 refugee families, reported the UNHCR. Cook from Save the Children said that it was “incredible that this has happened so quickly. We’ve got another two months of rain and this has happened after just 24 hours.”

The monsoon comes after weeks of hot weather, during which the largely Muslim Rohingya refugees have been fasting for the holy month of Ramadhan. Observant Muslims cannot eat or drink from sunrise to sunset, which in Bangladesh lasts almost 15 hours.

“Everyone says ‘I’m glad it’s Ramadhan but our houses are made of plastic’,” said Cook. 

“You go into one of these houses and you just can’t stop sweating. It has made what is already an extremely challenging situation even more difficult.”

Muslims mark the end of Ramadhan with Eid al-Fitr, usually celebrated by spending time with family, giving gifts to children and eating special food.

A Rohingya refugee child is handed food rations at Jamtoli refugee camp near Cox’s Bazaar, Bangladesh, March 29, 2018. Source: Reuters/ Clodagh Kilcoyne

SEE ALSO: Nine months after military crackdown, baby boom expected in Rohingya camps

“Parents have said how upsetting it is that this year they can’t give their kids anything special just rice and lentils, which is what they’ve been living on for nine months,” Cook said.

Humanitarian agencies launched a Joint Response Plan in March in preparation for the monsoon, aiming to raise US$951 million to ensure health and food security in the camps. Funding is also required for building materials as floods and landslides destroy people’s makeshift homes.

To date, however, just 21 percent of the funds have been raised.

“Rohingya people are an extremely industrious group of people, they’re very resilient, they’re used to rebuilding,” Cook added. “As people’s houses are destroyed they pick things up and rebuild.”

Could your medications be making you depressed?

 Image copyrightGETTY IMAGES

By Alex Therrien-13 June 2018

When you hear of a drug having side-effects you might think of a physical reaction like a rash or a headache.

But according to a new US study, many commonly-prescribed drugs may increase the risk of depression.

The list includes heart medications, birth control pills and some painkillers - things lots of people in the UK are also prescribed.

More than a third of the drugs the 26,000 participants took had depression as a possible side-effect.

What's going on?

The study, in the Journal of the American Medical Association, looked only at people in the US who were 18 or older and taking at least one type of prescription medication between 2005 to 2014.

It found that 37% of these prescription drugs, which also included some painkillers and antacids, had depression listed as one of the potential adverse effects.

Rates of depression were higher among the study participants taking these drugs:

• 7% among those who took one of the drugs
• 9% for people on two
• 15% for people taking three or more

Around 5% of US adults are estimated to suffer from depression.

Lead author Dima Qato, an assistant professor at the University of Illinois, said: "Many may be surprised to learn that their medications, despite having nothing to do with mood or anxiety or any other condition normally associated with depression, can increase their risk of experiencing depressive symptoms and may lead to a depression diagnosis."

However, it's not clear if the drugs are to blame for low mood.

Feeling ill for any reason can make you feel low. And it is possible some of the participants may have already had a history of depression.

What do experts say?

UK experts cautioned that the paper shows an association between taking these drugs and an increased risk of depression but not cause and effect.

Prof David Baldwin, from the Royal College of Psychiatrists, said: "It is not surprising that using medicines to treat physical illnesses such as heart and lung disease should be associated with depressive symptoms, as these physical illnesses are themselves linked to an increased risk of depression."

The Royal College of GPs also pointed out that not all of the findings will necessarily apply to the UK, as the health system is different in the US.

Nevertheless, its chair, Prof Helen Stokes-Lampard, added that it shows "how vital it is that patients disclose any medication they may be taking that the GP might not be aware of, or to the pharmacist if buying medication over the counter".

Image captionExperts said the paper showed a link between these drugs and and depression but not cause and effect

What's the risk?

It depends on the medication.

For some drugs, depression can be a common side-effect, such as certain birth control pills. But for others it's much rarer.

Very common side-effects will affect more than one in 10 people, whereas those that are very rare will apply to fewer than one in 10,000.

This information is printed inside packets of medication in the Patient Information Leaflet and is also searchable online.

Prof David Taylor, from the Royal Pharmaceutical Society, also said it was important to consider whether there was a "plausible explanation" for why a drug might cause depression.

For example, with oral contraceptives there is a clear association between hormone levels and mood.

But in others, like heart medication, it is trickier to unpick whether it's the drugs or the condition that might be causing the depression, he says.

"We're not very good at working out what the drugs cause and what just happens in the course of somebody being treated which isn't linked to the drugs, " Prof Taylor said.

• 'Drug errors cause appalling harm'
• Dementia risk linked to some medicines

What should I do?

If you're taking any of these medications currently and have no signs of depression then you shouldn't worry, Prof Taylor advises.

For those on these drugs who are experiencing depression, he recommends speaking to your GP or specialist doctor to discuss if there might be drugs that don't have the potential side-effects.

If you're thinking about taking some of these drugs, he said it was worth being "somewhat cautious".
"That applies particularly if you're already taking another drug which is linked to depression."

Follow Alex on Twitter.

Undue focus on negatives and non-communication of positives in governance

By Jehan Perera-June 11, 2018, 10:18 pm 

Political attention at the present time is focused on two issues that are being used to create a sense of larger governmental failure. The first is that of payments made by a single business company, PTL and its subsidiaries, to a large number of parliamentarians whose number seems to be increasing by the day. Although the sums being mentioned are in the millions, which is very large by the calculations of ordinary citizens, they are nowhere near the tens and hundreds of millions that are understood to be part of every major infrastructure project, some of which have turned out to be pure white elephants, such as the Mattala International Airport. As mentioned by some of the politicians whose receipts of funding have been exposed, the practice of receiving funds from business enterprises is widespread.

The other matter that has been receiving considerable attention is the issue of the targeting of media institutions, TNL and Lanka E News, by regulatory action. It is suspected that there has been a political motivation behind the singling out of these two organisations for adverse action. However, those who focus on this do not give their attention to the larger context in which freedom of speech and media has expanded from what it was in the not so distant past. In the same way that the PTL case is being used as a political instrument to target individual politicians so is the harassment of media institutions being used to target individual politicians. What is necessary is a wider focus in which actions taken to highlight and restrict corruption and the equal treatment of media institutions are made part and parcel of the system of governance.

This broader perspective is to be found in the European Union’s assessment of governmental progress with regard to human rights for its trading purposes and to see if Sri Lanka continues to qualify for the GSP Plus tariff concessions. This is a trade benefit that is given to countries that are making a serious effort to create a more democratic and human rights respecting environment within their polities. Sri Lanka has passed this test again, which is for the benefit of the country’s economy. The promotion of Sri Lanka’s exports by providing them with easier access to European markets is a way of promoting economic growth within the country. Export-led economic growth leads to a strengthening of the productive capacities within the country and compares favorably to loan-led infrastructure development which is often squandered on uneconomical projects.

EU STATEMENT

Following the third meeting of the Working Group on Governance, Rule of Law and Human Rights under the European Union-Sri Lanka Joint Commission, the EU commended efforts by the Sri Lankan government for its progress in protecting and enhancing human rights. The meeting took place in the context of Sri Lanka being granted access to the EU for its exports under the EU's Generalised Scheme of Preferences Plus (GSP+) in May 2017. The EU noted that progress has been made by the Government of Sri Lanka in protecting and enhancing human rights and fundamental freedoms in the country.

The EU also pointed out that a number of important measures have been taken, including the operationalisation of the Office on Missing Persons, the ratification of the Optional Protocol to the Convention against Torture and the passing of the Right to Information Bill. The EU also noted many important ongoing reforms, such as the replacement of the Prevention of Terrorism Act and reform of the Code of Criminal Procedure Act to bring them in line with international standards, and the status of the Constitution. However, it also noted that the full implementation of the UN Human Rights Council Resolution of October 2015, including the urgent return of land, remains a priority and expressed its readiness to continue supporting the Government in advancing national reconciliation.

The irony is that most of the positive developments that the EU has noted are not in the political debate within Sri Lanka at the present time and instead it only the negative ones such as bribe taking and political in-fighting within the government alliance that are getting attention both in the media and on political and intellectual platforms. The political scandals and rivalries within the government are being reported and commented upon in great detail. But the passage of new laws and formation of new institutions that will bring about changes in the political culture in the longer term are not being adequately communicated to the general population.

Each of these laws have been advocated for decades by civil society and human rights activists as being essential for good governance in the country, and they have come to fruition during the period of the National Unity Government. For instance, the issue of large numbers of people going missing during times of anti-state violence has been with Sri Lanka from 1971 when the first JVP insurrection took place. Subsequently there have cycles of repression that led to more and more missing persons being added to the list, but with the victim families having no place to go to get an adequate response. The Office of Missing Persons has been set up as a permanent institution with a substantial budget and with commissioners with proven track records.

ALLIANCE ACHIEVEMENTS

The new laws and institutions that the EU has noted, and which has the potential to transform the life of the citizens in the years to come, are the result of the UNP-SLFP alliance that is led by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe. They have used the 2/3 majority in parliament that their alliance has made possible to pass the landmark 19th Amendment and also important laws such as the Office of Missing Persons, Right to Information and law against Enforced Disappearances. These are significant achievements and the fullest credit for them needs to be given to the president and prime minister who head their respective political parties and have steered the country to achieve these tasks which have earned the commendation of the international community and won their support and access to their markets.

There are many who are frustrated by the infighting within the government and its failure to take decisive action on its promises with regard to anti-corruption and economic prosperity. They may believe that an end to the UNP-SLFP alliance is the way forward for Sri Lanka. However, such a break in relations, if it takes place, could take the country on another path of instability and uncertainty. It is necessary to appreciate and commend the Government of National Unity for its achievements that have been noted internationally by the EU and use those achievements for the purposes of reconciliation both within and outside the government. It is also necessary to build public opinion for them to stay together. The government has more tasks to accomplish which may still happen.

It is reported that there is rapprochement taking place between the UNP and SLFP, and the president and prime minister in which the two focal points of discussion were about fast tracking development plans and fulfilling the pledges made to the people ahead of the January 2015 presidential election. They agreed that there was a need for a limited common programme and to finalise it during future meetings. They reportedly spent considerable time on the pledges already made. That brought about a discussion on police investigations in both corruption cases and the abduction, torture and killing of several persons. It is important that systems be put in place and ensure that those who lead the country are those who respect those systems and not believe they are above the law.

Viswamadu Tamil people weep and wail when army colonel leaves on transfer ! Those wanting evacuation of army dumbfounded !

(Lanka e News – 12.June.2018, 9.30PM)  Following the transfer order to  army colonel Ratnapriya Bandu from Viswamadu , Mulaitivu to  Ambepussa,  and when he was readying to leave to his new station, the residents  of Vishwamadu arrived at his place of work and wept openly  before him .

Among those who visited him were groups who were with  LTTE organization and had come out from rehabilitation camps , as well as villagers.  It was because of the yeoman service Ratnapriya rendered to the people while he was in Viswamadu that inspired the people to personally visit his office and display their emotions. 

While the chief minister of northern province is insisting on  the evacuation of the army from the north , the residents of Vishwamadu , Mulaitivu  on the other hand  are weeping when an army officer is leaving their area . This is because they cannot forget how they benefited  from the yeoman services of the forces which helped them immensely.

Although the ordinary people are not leveling charges against the army that it is the same army which fought the war in Mullaitivu , the politicians of the north have gone even as far as  Geneva highlighting and leveling  those charges.

In any event when Colonel Ratnapriya was bidding farewell , a  large number of people were seen weeping  and wailing  .

Need there be better testimony than this in proof of reconciliation ?

Photos and report by

Dinasena Rathugamage

Translated by Jeff.

---------------------------
by     (2018-06-12 16:18:41)

Diplomacy and Foreign Judges

2018-06-13

Could there be a keener pleasure than to sit around a fire and discuss diplomacy with a diplomat? Of course, there is no fire; just coffee, and that only in plastic cups, which nevertheless provides the fire, inside, instead of outside, but with the same cheering and relaxing power.  

It’s after the coffee break at the ‘Education Institute’ and Ambassador Palihakkara has invited questions. “You said we cannot operate in isolation. But we have opposed the intervention of foreign judges in HR issues. As a diplomat how do you view this?” a student asks. Palihakkara makes it clear that he views it with disfavour, and concern and has no doubts that the same degree of disfavour would be forthcoming from every country, were such a thing suggested to them.   

“I have probably spent around 20, 25 years at the HR Commission and the UN and Council and I have not seen a single country who wants foreign judges to come. I think the foreign judges are being suggested on the basis that the judiciary of that country is not independent. So if you show that your judiciary is independent, no one can ask foreign judges to come. Personally, I think having foreign judges will create more problems than solutions.”  

If we are up to showing that our judiciary is independent, we can take a firm stand that our judiciary meets international standards. So we don’t need foreign Judges

Not everyone feels this way. I have met Sri Lankan patriots who feel differently. “I have always argued; how do we set up a credible mechanism to inquire into this, credible to the Tamils, credible to the rest of the world, and credible to ourselves? I don’t think you can do that exclusively with a local system. You need to bring credibility to the system you are setting up by bringing in an international panel of experts to preside over, but don’t lose control over the process. I think it can be done. Foreign judges are basically judges who will apply the law,” Godfrey Gunatilleke, Chairman Emeritus, Marga Institute said to me in 2015, when I interviewed him for Sunday Island.  

Under the influence of that memory, I question Mr. Palihakkara. “I think this whole issue of being against foreign judges goes against the grain because there’s a huge credibility issue in countries like SL, third world countries. Credibility is only achieved when foreign assistance is obtained,” I begin coherently enough but muddy the waters somewhat by mentioning, Scotland Yard assistance, foreign coaches, foreign technical assistance as fait accompli arguments in favour of foreign judges.  

“There is a distinction between technical assistance and judges,” Mr. Palihakkara asserts gently. He is all for getting foreign technical assistance for forensic and investigative activity and think it will enhance credibility and efficiency. “Getting foreign judges for judicial verdict is different.” Obviously, the former commissioner of the Lessons Learnt and Reconciliation Commission feels strongly about this. Perhaps it’s a matter of national pride and honour, though the ambassador never puts it in such emotional terms. “There have been a lot of complaints about the judiciary, I agree with you. But we must rectify it here. We must allow the judges to work independently, not intimidate them. Politicians should stop telephoning them. Those are the things we must do. You can’t ask white gentlemen or ladies to come here and tell the judges that. You know our judges are literate people, educated, if they are allowed to work without telephone calls, intimidation and various other methods, they will work.”  
Yes definitely national pride is an issue here. But not the only issue which plagues Mr. Palihakkara’s mind “If you have foreign judges, there will be conflict,” says this foreign service mandarin who became Foreign Secretary, Permanent Representative of Sri Lanka to the United Nations and retired as Governor of Northern Province. The idea of foreign judges according to Mr. Palihakkara generates too many open questions “Personally, I think having foreign judges will create more problems than solutions. How are the foreign judges going to operate? In conjunction with local judges or sitting in judgement of judgements delivered by local judges. Does our legal framework permit such things? Do we have to enact new legislation or is it possible to get the legislation through parliament? I remember in Cambodia they had foreign tribunals that was a failure. Some people criticized this for being a waste of UN money.”  

You know our judges are literate people, educated, if they are allowed to work without telephone calls, intimidation and various other methods, they will work

Again, I have sat around a different fire and heard a different reaction to foreign judges, treating all anticipated problems as so much gristle to be cut away to reach the metaphorical meat- a solution to the credibility issues which would plague a purely domestic judicial process.   

“Hybrid as given in the OHCHR report suggests something in which foreign judges will be nominated by them like in Cambodia and Lebanon. We won’t have that. We won’t have UNHRC nominating our judges. The choice is ours. It won’t be hybrid in that sense. It will be hybrid in the sense that we will be bringing in international expertise to give credibility to this mechanism. I am with it,” Godfrey Gunatilleke had said sitting around our interview fire.   

We won’t have UNHRC nominating our Judges. The choice is ours. It won’t be hybrid in that sense. It will be hybrid in the sense that we will be bringing in international expertise to give credibility to this mechanism

As I sit around this current fire and listen to Mr. Palihakkara, I am conflicted. How to break the deadlock between these two stances? What’s the clinching argument? What’s so wrong with foreign judges? If they will help bridge the trust deficit why not have them? What harm can they do, what danger do they inherently carry that no country will have them voluntarily? Can the trust deficit be addressed without incurring this sort of danger? 

 
Yes, according to Mr. Palihakkara, if we are up to showing that our judiciary is independent, “we can take a firm stand that our judiciary meets international standards. So we don’t need foreign judges” If we don’t take this sort of firm stand, the ambassador cautions, “our local human rights problems get internationalised. Foreign judges mean you are internationalizing it.”   

Yet resolution A/HRC/RES/30/1 co-sponsored and presumably containing text pre-negotiated and agreed upon by Sri Lanka, “Welcomes the recognition by the Government of Sri Lanka that accountability is essential to uphold the rule of law and to build confidence in the people of all communities of Sri Lanka in the justice system, notes with appreciation the proposal of the Government of Sri Lanka to establish a judicial mechanism with a special counsel to investigate allegations of violations and abuses of human rights and violations of international humanitarian law, as applicable; affirms that a credible justice process should include independent judicial and prosecutorial institutions led by individuals known for their integrity and impartiality; and also affirms in this regard the importance of participation in a Sri Lankan judicial mechanism, including the special counsel’s office, of Commonwealth and other foreign judges, defence lawyers and authorized prosecutors and investigators;”   

According to Mr. Palihakkara however, this resolution does not render us optionless by “mandating” foreign judges. “It’s not obligatory. It says having foreign assistance and judges would be important. So the option is left here”  

The resolution being co-sponsored, doesn’t it mean that Sri Lanka too has affirmed the importance of the participation in a Sri Lankan judicial mechanism of foreign judges? It would appear not, to judge by the curt repudiation of the idea by the President of Sri Lanka in his  January 21, 2016 interview with BBC Sinhala service, just months after Resolution 30/1. Displaying decisive body language and barely concealed impatience with even the suggestion of international participation or foreign judges in investigating HR violation allegations, the President stated that of the proposed measures by the UN HR Commission, they have to consider which would be in the government’s power to adopt and which they wouldn’t be able to implement. Admitting the government’s clear acceptance of investigations into allegations of HR violations, the SL Head of State was categorical that ensuring fairness in such investigations should be done within a domestic judicial process, in accordance with SL constitution and without the participation of foreign judges, because they had no intention of importing foreign judges to ensure fairness. He will never agree to such a thing. He has faith in the Sri Lankan judiciary and the investigating bodies and officers within the terms of the constitution and a domestic mechanism. Even seeming to reject foreign investigative and forensic assistance, the President denied the need to import anyone from anywhere else.   

There are three things to remember about Resolution 30/1. It resulted from a collaborative approach; its text was worked out between USA, new government of Sri Lanka and other stakeholders, from a first draft by USA; and it was co-sponsored by SL. 

SL seems to say, we are within our rights to reject those few recommendations that we were unhappy about at the time of the collaboration. As a resolution is not a treaty, we didn’t feel it was necessary to make a ‘delete-or else’ fuss about every point in the collaborated text

The SL interpretation of ‘collaboration and co-sponsoring’ seems to be that there is no need for a collaborator to endorse and take responsibility for every point in the final collaborative/co-authored text. As long as the majority of the points are endorsed and complied with by the co-sponsoring, collaborating party, a collaborator’s/co-sponsor’s obligations can be considered fulfilled. As all collaborated texts are essentially compromises, SL seems to say, we are within our rights to reject those few recommendations that we were unhappy about at the time of the collaboration. As a resolution is not a treaty, we didn’t feel it was necessary to make a ‘delete-or else’ fuss about every point in the collaborated text. What we meant by affirming our collaboration as a co-sponsor is simply that overall, on the whole, for the most part, we are with Resolution 30/1, while retaining the right to disassociate ourselves from the unacceptable bits.  

Evidently, countries have their ways of working within the UN system. Palihakkara tells us about Cuba, “USA was trying to harass Cuba on the human rights count but they fought successfully against the UN resolutions because they put in place in their own country, very efficient judicial and law enforcement measures. And eventually the USA had to withdraw those resolutions from the Human Rights Council.”  

Sri Lanka’s difference I think to myself, seems to be that we don’t fight against the USA led UN resolutions. We collaborate with them and co-sponsor them so that when and if, we, like Cuba, put in place in our own country, very efficient judicial and law enforcement measures, USA can feel a warm glow that it was a partner, a stakeholder in that positive transformation. But then, didn’t USA feel a warm glow when Cuba was doing that, that it was USA resolutions that were driving positive change in Cuba? Apparently not. They would just have felt defeated with every resolution they had to withdraw.   

Ambassador Palihakkara tells us that when he left New York in 2009, there was a USA sponsored resolution in the UN General Assembly, proposing an embargo against Cuba that only four out of the 193 UN member states supported. Cuba achieved this according to Mr. Palihakkara through the stance: “In our country, we may be poor but we don’t have torture, people don’t disappear. You can come and see.”   

If we are ever able to take up such a stance, we won’t have defeated Resolution 30/1, we wouldn’t have defeated USA. But what will such ‘no defeating’ entail? The simplest way to make USA feel a warm glow could be to just do as it wishes. Is asserting our sovereignty within a collaborative approach harder than in a confrontational approach, where SL like Cuba would seek to defeat a UN resolution by proving positive things? These are things I don’t ask Mr. Palihakkara because it’s time to go home.   

CONTEST TO FETE PUBLIC OFFICIALS

TISL LAUNCHES ‘INTEGRITY IDOL’:-Wednesday, June 13, 2018

Transparency International Sri Lanka announced Tuesday, that it was launching a new islandwide “Integrity Idol” contest to identify and felicitate exemplary public officials.

“(This) is a very unique public award to recognise integrity in public service,” TISL Executive Director Asoka Obeyesekere said, speaking at a press conference at the Sri Lanka Foundation Institute yesterday.

“The key concept here is to ‘name and fame’ public officers,” he said. “Because we wish to recognize those public officers who have shown integrity and honesty sometimes in very challenging and difficult conditions.”

Obeyesekere asked the public to nominate people they knew at any level of government, from schoolteachers to customs officers, whom they believed performed their role with honesty and integrity. “We very frequently hear negative news around the public service,” he said. “But I think the one thing we can all agree on is that there are also many positive examples of people working in the public service that is often unrecognized.”

Islandwide voting is now open, and nominations can be made until 31 July. Five finalists will then be chosen by a panel of judges, Obeyesekere said, and then the public will select a winner through SMS voting.

“The public sector must have a high level of integrity,” retired Deputy Auditor General and one of the contest’s judges M.D.A. Harold said. “This is a good effort and good arrangement to allow the public to appreciate the integrity of public servants,” he said.

Anyone wishing to make a nomination can call TISL at 0711 295295 or 0761 178844.
Nomination forms in all three languages can also be downloaded online at www.integrityidol.lk, or collected at TISL’s head office at 5/1 Elibank Road Colombo 5 or its legal aid centres in Matara and Vavuniya.

After the panel selects five finalists, their stories will be filmed and shown on TV and social media. People can then vote for their favourite public official over SMS.
The final award will be given in October.

The Integrity Idol is organised with the Accountablity Lab, which has already carried out similar campaigns in Nepal, Pakistan, South Africa, and Nigeria.

Six ways Sri Lanka can attract more foreign investment

To facilitate Foreign Direct Investment (FDI), Sri Lanka launched last week an innovative online one-stop shop to help investors obtain all official approvals. To mark the occasion, this blog series explores different aspects of FDI in Sri Lanka. Part 1 put forth 5 Reasons Why Sri Lanka Needs FDI. Part 3 will relate how the World Bank is helping to improve Sri Lanka’s enabling environment for FDI.

( June 12, 2018, Colombo, Sri Lanka Guardian) Sri Lanka and foreign investments read a bit like a hit and miss story.

But it was not always the case.

Before 1983, companies like Motorola and Harris Corporation had plans to establish plants in Sri Lanka’s export processing zones. Others including Marubeni, Sony, Sanyo, Bank of Tokyo and Chase Manhattan Bank, had investments in Sri Lanka in the pipeline in the early 1980s.

All this changed when the war convulsed the country and derailed its growth. Companies left, and took their foreign direct investments (FDI) with them.

Nearly a decade after the civil conflict ended in 2009, Sri Lanka is now in a very different place.

In 2017, Foreign Direct Investment (FDI) into Sri Lanka grew to over $1,710 billion including foreign loans received by companies registered with the BOI, more than doubling from the $801 million[1] achieved the previous year.

But Sri Lanka still has ways to go to attract more FDI.

As a percentage of GDP, FDI currently stands at a mere 2 percent and lags behind Malaysia at 3 – 4 percent and Vietnam at 5 – 6 percent.

More importantly, FDI into Sri Lanka has been skewed away from high value-added global production networks. And currently the larger share of FDI inflows have been focused on infrastructure.

While they may boost jobs and growth temporarily during the construction period, these investments have little long-term impact. Compare this to a factory or a new IT service firm which would employ people as long as it makes profit, and export, pay taxes, and contribute to Sri Lanka’s growth for decades.

Moreover, high infrastructure FDI relies on few and large infrastructure deals that are unlikely to be replicated and sustained over time.

On the other hand, manufacturing and services hold a better promise for the long run, but even there, a large share of FDI is related to traditional sectors and local market-oriented activities with low value-added, where productivity gains are small.

To keep and increase FDI flows, Sri Lanka will need to make concerted and ambitious efforts to address gaps and play to its strengths.

Simply put, Sri Lanka can improve FDI by creating a more hospitable environment for investments. Taking steps in this direction is essential for domestic investment as well, not only FDI. And while the government has already begun targeting problem areas, much more is needed.

To that end, here are six ways Sri Lanka can improve FDI:

1. Reworking trade policy

Reforms in Sri Lanka’s trade policy saw eliminations or reductions of some 1200 para-tariff lines in late 2017, and further liberalization is expected with the budget in 2018 and beyond to boost trade. More trade will help diversify the economy and exports, and lift a burden off of the public sector to drive growth. It can also actively promote technology absorption, skill upgrading, and increased competitiveness; workers, consumers, producers and the state will benefit in the long-run as a result.

2. Improving logistics and trade facilitation

Sri Lanka can leverage its unique location and trade agreements to overcome the dis-economies of its small scale. The Colombo port, which already sees 80 percent of its volume come from trans-shipment cargo, is poised to grow. However, Sri Lanka cannot take its position for granted with high growth in other ports in Pakistan and India.

Another way to compete is on speed and cost of trade processing. While domestic logistics are inefficient, internationally Sri Lanka is performing better. Currently, it ranks 57.7 out of 100 on the BMI Logistics Risk Index, and places 15th on the UNCTAD Liner Shipping Connectivity Index, which ranks countries according to their level of connectedness to international maritime networks.

The per-container cost for exporting and importing to and from Sri Lanka are much lower than the South Asia average but not at world class level (respectively, US$560 and US$690 – South Asian average is US$1,923 and US$2,118, 2015 data). To go the extra mile to a regional logistics hub, the government has started reforms including establishing a Trade Information Portal and the National Single Window which will streamline trade processing across the 20 plus agencies involved.

3. Promoting investments and enabling regulations while avoiding policy uncertainty

The island was ranked 111th out of 190 economies in the Ease of Doing Business index 2018 which shows opportunity for improvement. The Government has carried out some focused reforms since 2016 to improve investment climate, and with the expected lag, reforms are cropping up. In 2017, trade across borders was made more efficient, and this year improvements are expected relating to starting a business, property registration and construction permits.

Reforms are needed to address critical challenges in areas like land ownership. Currently, land is primarily state-owned in Sri Lanka, and land administration is weak and cumbersome. Anecdotal evidence points to discouraged FDI projects due to land issues. A large share of exports and most export innovation has occurred in a few Export Processing Zones, primarily in the Western Province, that are now generally at capacity, new SEZs are being planned.

Further, the BOI (Sri Lanka’s main FDI facilitation body) is transitioning towards modern investment promotion. Internal Revenue Act streamlined and improved the efficiency and transparency of incentives applicable to foreign investments in Sri Lanka. The government is also liberalizing the foreign exchange controls.

Policy uncertainty in Sri Lanka has proven daunting for investors, with a lack of information on regulations, high fragmentation in policymaking, frequent policy changes and slow policy implementation. Long-term policy strategies can serve as path-setters and expressed commitment to policy continuity in support of the GOSL vision.

4. Boosting innovation by way of competitive product and financial markets

Sri Lanka has seen little transformation in what it exports over the last 20 years. There’s been limited innovation and diversification even into “nearby product” space (new products closely related to existing ones) which is an easier step that happens organically with investment. This difficulty moving into new space has also left the country out of step with regional and global production networks. Where innovation exists, it is limited to a handful of industries. A national innovation strategy seeks to address gaps and support start-ups and SMEs.

Financial products have also remained behind the firm needs – e.g. SMEs need factoring and leasing, supplier finance mechanisms and export-related financial instruments. Now the Secured Transactions Act is being amended to allow one of those innovative products – the use of movable collateral.

5. Addressing labor related issues and getting women to work

Efforts are also needed to expand the pool of labor, relax constraints in labor laws such as long and costly termination procedure, and equip Sri Lankans with skills in demand in the marketplace. In particular, Sri Lanka can benefit tremendously from boosting its female labor force participation rate by addressing issues such as a lack of quality childcare, skills mismatch, unsafe transport and poor working conditions that keep women away from the labor force.

Sri Lanka could also ease the access of local companies to foreign expertise through introducing simpler visa procedures, which are currently complex and burdensome for foreign employees in Sri Lanka, limiting FDI especially for smaller ventures such as in tourism.

6. Providing enabling logistics and the right infrastructure environment

Nationally, Sri Lanka needs to address transportation shortfalls, which have seen inequitable development with some regions disconnected from growth, increasing issues of congestion, and poor safety for women. Different areas face different transportation gaps in roads, air travel and marine transportation infrastructure while rail infrastructure is outdated and limited, especially for the transport of goods.

[1] These figures includes loans, excludes inflows to non-BOI companies and direct investment in listed companies in the CSE not registered with the BOI