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Sri Lanka on UNP’s neoliberal path: Will it succeed or lead to disaster

Jun 22, 2016
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by Tissa Vitarana

The UNP/SLFP Alliance government came together, ostensibly as a “National Unity” government, thereby escaping the restrictions placed on the number of Ministers by the 19th Amendment. It had as its main objectives (a) the establishment of good governance and (b) the changing of the Constitution to restore democracy and to build national unity. This Alliance Government was for a two year period, with provision for extension, to achieve these laudable objectives. But in fact from the very beginning the opposite has been the case and the Constitution, the Standing Orders of Parliament, and accepted legal processes have been repeatedly violated, with little comment from either the press or the NGOs. From the top down, the lack of a coherent policy (other than revenge), the lack of unity and commitment, together with encouragement of crime and corruption at all levels of Government, right down to Local Government, where the elections are being illegally postponed (which never happened during the earlier Government, despite the war), shows a lack of respect for the democratic rights of the people. Despite this, the Government enjoys minority confidence which helps to build unity, but the emergence of extremism and undue stress on accountability is posing a threat to reconciliation. The LSSP fully supports the Constitutional Assembly process which is going ahead within Parliament, (after the attempt to take it out and fix it failed). We support the total removal of the executive presidency, a mixed electoral system based on PR and FPP, and building national unity through optimal devolution within a unitary state.

But under cover of good intentions, what is being really implemented with amazing rapidity and commitment is the UNP’s “Regaining Sri Lanka” Neoliberal programme. It was first introduced by the UNP Government of 2002, and is to be carried out as the future 5 year programme of the present Government, as stated by the Prime Minister (PM) in his address to the Parliament, overshadowing the Finance Ministers Budget Speech. The President who appears, or pretends, to be unaware of much of what is going on, is clearly an integral part of it. This became evident by his participation at the G7 Summit of big powers, which is not in recognition of the great progress of Sri Lanka, as claimed by sections of the press. It was a shameless admission of the fact that we are now a subject nation headed by a government that is ready to do what America wants. We should be very sad that, since British rule, once again Sri Lanka is becoming an exploited neo-colony, losing our independence and sovereignty. The “Regaining Sri Lanka, for Imperialism” neo-liberal agenda of America and IMF is now in operation here by the UNP.

The coming together of the former imperialist powers (USA, UK, others in Europe and Japan) headed by the USA, forms the most powerful empire in the world’s history, the American Empire. It is really headed by the 32 Americans and 17 Europeans who together with 13 others own more than half the world’s wealth (according to Oxfam). It has several hundred military bases around the world to enforce its dominance. Its agent here,the PM, Ranil Wickremasinghe, announced at a Navy awards ceremony that the Sri Lankan Navy, besides protecting our territorial waters (where it has even failed to prevent illegal foreign fishing), must undertake the task of protecting the rest of the Indian ocean extending from the Maldives to Singapore, for which the necessary war ships will be provided. Japan declared at the G7 it would provide two patrol vessels, but the bulk will undoubtedly come from the USA, possibly its powerful 7th Fleet. The head of the USAs Military operations in South East Asia stated “now that Sri Lanka is with us we can complete our defense ring around the Indian ocean by an excellent base there”. No doubt he had Trincomalee in mind. This was echoed by the US Ambasador to Sri Lanka. That Trincomalee, not Jaffna, is to be developed as the Megacity in the North, fits in with this plan.

But Sri Lanka’s role for the US Empire clearly goes beyond that. The Cabinet has taken a decision to allocate US $ 400 million to purchase fighter jet planes for our Air Force. Are we at war? Are we being threatened by foreign invaders? No. We have become a part of the American war machine, at our expense, but effectively camouflaged it. There is talk about buying more modern weapons for a further $ 400 million for the Army with our money. No wonder our President is being wined and dined alongside Obama!

The Socioeconomic aspect, besides the military aspect, of the UNP Agenda, is fast gathering momentum. Since this government came to power, to find the money to honour its election promises, it has been getting into massive debt. Due to increased purchasing power from tax concessions given to the rich, the cost of vehicle imports went up from $857 million in 2014, to $ 1,300 million in 2015, and the cost of consumer goods went up by 22% to $ 4713 million. (IMF aim is not to develop public transport, but the private sector). The adverse trade balance increased our foreign debt to 77% of GDP. Thus 60% of the debt repayment made in 2015 was for the loans taken by this UNP/SLFP Government.

The UPFA government loans are therefore not the major cause of our debt problem. The devaluation of our Rupee (SLR), whether as an IMF directive or due to lack of dollars, has increased the cost of living and the internal debt.

The Government stopped borrowing from China at lower interest rates (6%), and has resorted to the sale of Government Bonds for debt repayment and internal financing. First set was for $ 10 Billion and the last set of Government Bonds sold by the Central Bank was for $ 3 Billion, at very high interest rates (12 to 14%). The foreign reserves are only $ 6 Billion (that of Taiwan is $ 420 billion). Despite this the Government could have settled the debt problems and stabilized the economy on these loans, at lower interest rates, if racketing on Bonds was avoided. If the USA and Britain are borrowing massively from China, why not Sri Lanka. Clearly the situation created is to justify obtaining the IMF Loan, with all its conditions.

The IMF loan is small ($ 1500 million), spread over three years, leads to unpopular austerity measures and weakens the role of the state. Why speedily implement what we can do without? It is clearly a part of the neoliberal agenda of the USA which is designed to directly exploit countries like Sri Lanka as subservient and dependent economies, so as to revive the US Empire which is in dire economic straits, once again. Instead of the expected recovery in 2016, a crisis as severe as that of 2008 is predicted. The only other course, in this nuclear bomb age, is to create localized conflicts and wars, as the USA produces 60%, and Europe 20% of all global arms, their major industry. We must realize that the IMF austerity programme that caused the Greek tragedy, the collapse of that economy, is now being implemented here in Sri Lanka.

The key elements of the IMF/UNP Neoliberal Agenda are:

(a) Balancing the Budget by increasing indirect taxes like VAT (to 15% from the earlier 11%), and widen its scope to even include utilities like water, increasing the burden on the people. There is a ripple effect that will greatly increase prices and the cost of living. Not only the consumer but also the micro and SME entrepreneur sector is badly affected, and a deputation that met me, said it is better to stop producing, and import instead. But the burden on the rich is relaxed – the upper limit of direct taxes has been reduced for individuals (from 24% to 15%) and for companies (from 28% to 18%). The large number of direct tax dodgers has been legally increased by raising the taxable minimum to Rs.2,500,000.

A capital gains tax is mentioned, but unlikely to materialize. As a result indirect taxes will go up to nearly 86%, while that on the rich will come down to about 14%. The rich-poor gap will widen, increasing lawlessness and crime. Luxury import increase will aggravate foreign debt.

(b)Severe cuts in welfare services are also proposed – free education and health, pensions, allowances for elderly and differently abled, and all other subsidies including agriculture. Cuts in the public sector work force e.g. 12,000 jobs in the CTB, less state jobs for graduates etc.

(c) Sale and control of our assets – both public and private, specially to foreign companies (Multinational Corporations, MNCs) is being cleverly manipulated. For instance by giving ownership deeds to those occupying state land ,once they fall into debt, will lead to their sale, ultimately to monocrop MNCs, like Monsanto. The State Banks are being weakened so that the Private Banks, both local and foreign can dominate the financial sector, fleecing the customers. Labour laws are to be relaxed, contract labour promoted, and trade unionism discouraged.

(d) Capital Account completely opened – This is the biggest gamble. The aim is to encourage the free flow of capital in and out of the country, and encourage FDI. But last year alone $ 2 billion of foreign capital, mainly from the Stock Exchange, left our shores because of the unfavourable business climate in Sri Lanka. Becoming legal, local capitalists will do the same. In the context of the global economic crisis FDI based development is unlikely. We need to better develop our own Science, Technology and Innovation based Hi-Tech industry,( my endeavor as the former Minister), if we hope either to develop our own export industry or even attract FDI.

The IMF inspired neoliberal agenda of the UNP is headed for disaster. But unlike with Greece, there will be no EU type attempt to bail us out. USA and India have their own agendas, which will gain by our economic vulnerability.

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