Lanka Free Library

No crisis is without an opportunity. Sri Lanka’s current economic troubles do offer an unprecedented opportunity for economy-wide structural reforms and for the technology sector to seek new markets.

For any business into exports, the opportunity to launch improved and globally competitive products as well as services is unprecedented according to John Keells Holding’s Executive Vice President and Group CIO Ramesh Shanmuganathan. He says the weaker currency augurs well for any exporter and that advantage should be strongly amplified by collaboration, co-innovation and co-creation through strategic partnerships and investments to create a better and stronger portfolio of products and services to emerge stronger from the crisis.

The crisis can also pave the way for structural reforms in the economy too. Sri Lanka will require to create more predictable and enticing conditions to attract foreign investors to leverage Sri Lanka’s tech DNA according to Shanmuganathan. He discussed these ideas during an interview:

Sri Lanka faces an economic crisis. At this time what do you think the private sector can do differently from what it has done in the past?

I’ve been reflecting on our economic history recently due to the current challenges we face. From the time we adopted an open market economy in 1977 the net beneficiaries have been the countries who have been selling things to us. Our exports have grown to an annual $12 billion dollars or so. Value-added services like IT have exports topping a billion dollars. Our imports now touch $22 billion a year.

I feel that even compared to an average Indian company we now lack the entrepreneurial spirit to take Sri Lankan businesses, products and services to the global markets.

The successive events such as the Easter attack and the pandemic have hurt our economy. As one measure to overcome this, we should have explored offering incentives to investors to leverage Sri Lanka’s potential and the opportunity to establish joint ventures in our growth sectors such as manufacturing, agriculture, technology, transportation, logistics, hospitality, financial services, etc. For example, most countries like India, Thailand, and Malaysia coerced most major exporters to their countries to set up joint ventures and localize their value creation thus creating the right impetus for the economy and broad basing their export portfolio and revenue opportunity as well.

This strategy also helps to speed up innovation as well as drive outcomes faster and there are many long-term benefits to the economy from such an approach as compared to the ones that are 100% foreign-owned.

From a Sri Lankan context, all of our key sectors of the economy – the industrial, services and agricultural, have significant opportunities for innovation and modernization. The key challenge the country is facing in being a net importer of goods and services.

Specifically, if we take agriculture, we have a long agrarian legacy but today we are a net importer of agricultural products when we have so much fertile land. Why aren’t we incentivising the cultivation of crops with export demand and modernising the sector?

Those are a couple of the things that can be done quickly and can soon contribute to a country’s balance of payment like boosting exports. Food is something you can export anywhere; a commodity which is in short supply and with increasing demand due to global consumption.

Today, most are investing in crowded sectors with minimum export opportunities. Given that our domestic market is small, it become an absolute imperative for most to set their targets on global markets through clear strategies to differentiate and move up the value chain. Apparel is one of the biggest contributors to Sri Lanka’s exports, but our value addition has been hugely around the man-power on the shop floor which is at the very low-end of the value chain whereas the opportunity to scale up to drive innovation and the trend for the industry by establishing Sri Lanka as a fashion destination.

All of these aspirations do come with challenges, no doubt. No pain, no gain. We all need to wake up to this opportunity and look at moving up the value chain through collaboration, co-innovation and co-creation. Parallelly, we must develop the human capital required for those to succeed by reinvigorating our education sector through reforms as well as establishing vocational training were required to cater to the emerging human capital requirements. We must take cues from Singapore and Dubai in terms of how they have been able to establish themselves as strong economic hubs in their respective regions within a short span of 30 years.

You’re from the services sector, you lead a successful company in value-added exports. What do you think we should focus on to be more successful in this area?

We have made significant progress, but our exports today from the IT/BPO sector are not a true measure of what we are capable of. The key challenge is that we do not have the entrepreneurial zeal to aspire to go beyond the shores of Sri Lanka. We tend to stick to our comfort zones and have failed to create sustainable value.

Firstly, we have a very unique and significant cost advantage with the depreciating rupee. It may be a short term advantage, but we must strike when the iron is hot. We need to seize this advantage as an industry and look at all possibilities to spread our wings to create and/or acquire new markets through collaboration possibilities. We must leverage the Sri Lanka advantage and this industry must be motivated and nurtured through the right reforms and structures to drive at the least a 3x growth in the next 5 years.

Secondly, we must establish Sri Lanka as a Global Innovation Hub. This is where the strategies and initiatives must link up. We must incubate talent and move them up the value chain through these strategies and initiatives and create a global talent pool in significant growth sectors in tech, namely data/AI, Security, blockchain/NFT, multi-cloud, and low-code/no-code platforms, etc. We must establish the Sri Lanka brand to be synonymous with Open Innovation and create a talent pool that is best in class. The first step towards that is to attract MNCs as joint venture partners and fast track same through the right programs and incentives. This will provide the impetus we need to drive export diversification through technology on a clear roadmap for the economy

Thirdly, we must get into productization to break the linearity in terms of our revenue opportunity. We must build our products and services around the 3rd platform with a mobile-first, cloud-first and AI-first strategy. This will help us grow our revenue stream similar to India, Israel, Ireland, Thailand, Vietnam, etc.

Fourthly, to achieve that sort of scale we have to target the right products and services and the right markets. Today, most target predominantly Europe and to an extent the Middle East and Africa, but not much to the Americas which is one of the biggest, most lucrative and competitive markets. From a GDP point of view, the U.S is $21 trillion compared to Europe’s $15.3 trillion. Those are the two markets we need to actively look at exporting to. Very few companies have made it big in both of these markets.

That’s a food for thought for Sri Lanka’s IT Industry. We have to do what the apparel industry has achieved for itself over the years and look at strategic partnerships to gain access to these markets and build a portfolio that would attract such partnerships.

Due to this crisis, we are at a time of potentially great change. Things that were impossible six months ago may now be possible. If you address the IT sector’s challenges, particularly around talent, and if you were to look for bold solutions, what would those be?

The IT industry for the bigger part has focused on the sub-continent to a greater extent and especially Sri Lanka. The industry as alluded to earlier had a lot more upside globally but must establish itself as a unique value proposition and sustain the same in the longer term. Further, most big Asian companies have a conglomerate structure, similar to John Keells, and have not leveraged IT for their businesses adequately and hence have been challenged to build a viable business out of such opportunities. Those who have made significant strides in commercializing the same to the big IT powerhouses such as TCS, Wipro, HCL, NTT, etc. From a Sri Lankan context, most IT organizations fall under the SMB category and are challenged in building the brand and presence to take their offerings globally.

We at John Keells IT have been serving the John Keells Group as well as external clients who have been mostly based out of Sri Lanka other than specific sectors such as Aviation until 2017. We repositioned ourselves as a boutique consultancy organization focused on digital transformation in 2018 and have expanded our presence greatly into Asia and Middle East and Africa which now gives us the reach together with our strategic alliances to grow our revenue to a 3 to 5x in the next five years. To achieve the same we have continued to make significant investments in establishing our offices as well as creating a significant local presence to ensure that we gain that traction to command such a growth.

We have been shifting gears to fast-track our growth internationally over the last 3-4 years and have established a solid client base which augurs well for our future growth potential as well. We were only able to achieve the same since we matched our ambition by recruiting and developing the talent that was required to achieve the same.

You suggested companies seize this opportunity to go up the value chain and expand overseas. What have you learned from doing these two things at John Keells IT?

One of the main reasons for companies to struggle is because they are just selling bodies or billing clients by the hour. We did ask ourselves these questions – How do we break the glass ceiling? What can we do differently? How do we gain that unfair advantage?

The unique value proposition we had was that we were a prosumer of technology as well as a provider of the same. We mapped out clients who would potentially envision a similar transformation journey by leveraging our best practices as well as learning outcomes and engaged them on a more consultative footing rather than as a provider of technology solutions and services. It was an audacious move, kind of like what most consultative houses like McKinsey or Accenture would do. It paid off!!

Our thinking was, let’s ensure that there is a mutual relationship and buy-in for us to invest time and start an engagement. Our engagement was always focused from the C-suite downwards. This also gave us better visibility of the business as well as their challenges and then jointly map out solutions and services that befit them. This helped us to show the value we can create. It was a Value outcome-based discussion which resonated well with our customers and I personally spend a lot of time leading these discussions with the C-suites of our customers.

The unfair advantage for John Keells IT is that we are both prosumers as well as providers. We walk the talk and we eat our own dog food. This has brought about a bigger incentive for our customers since we have been able to help them leapfrog from our learnings and experience as a prosumer.

The last couple of years have been tumultuous due to Covid and now we have an economic crisis. If there were learnings in the last two years useful or relevant in the future, what would those be?

Sri Lanka must think global. One key thing for boards and leaders to focus on is to manage the overdependence of their business portfolios in one geography. I’ve been a very ardent advocate of building a global brand and a global business with many corporate leaders both locally as well as internationally. Today, most businesses in Sri Lanka have more than 90% of their revenue from Sri Lanka and this dependency itself is an inherent risk which should be better managed.

I felt that Sri Lankan companies were more globally focused prior to 2009, but since the 2009 peace dividend, realigned themselves to focus on opportunities that arose from it by moderating their previously ambitious plans for overseas expansion. This is impacting Sri Lanka in a big way in terms of her growth as well as exports, given that the Sri Lankan market is just 21 million people.

We must look at Singapore and Dubai for inspiration. From day one, these countries recognized their home markets were insignificant and won’t be enough for them to grow. So they focused on exports as their main thrust whilst maintaining certain elements of protectionism to nurture the local businesses. That is where I feel we went wrong, not only in the recent past but since opening the economy in 1977.

It would have been always good to have some level of protectionism to develop certain industries, like what India has done, which may have been useful for building an export platform and creating a talent pool which can create an exponential impact on the economy which in turn will help us to attract and retain the best talent we need to grow our economy.

We also need to look at continuously upskilling our human capital so that we could help them move up the value chain rather than be at the low-end of the value chain. This will also create a revenue portfolio which will be lucrative for the country and will help us retain our talent across the segments. We should look at more lucrative opportunities to train and deploy our human capital. For instance, globally, there’s a huge demand for nurses. We’ve got to identify those market gaps and orient our vocational training to focus on training maybe 10,000 nurses who will probably contribute more than 10x, compared to domestic workers.

It’s always good to examine our balance sheet and think for ourselves as to are we getting the best ROI out of our biggest asset – Human Capital. We must leverage our assets by continuously rebalancing our portfolios by assessing emerging trends and keeping in step to capitalize on emerging market opportunities.

One bottleneck companies face in going up the value chain is the quality of people they are able to hire. How have you addressed this when you grow the business?

John Keells Group has always invested in people. We have multiple programs across the group to attract and nurture talent, both centrally as well as at the subsidiary level, based on the business strategies and initiatives. At John Keells IT, we have multiple programs in addition to what’s rolled out at the group level to address our present and emerging talent needs for both leadership as well as tech talent.

One of the biggest challenges I see is that most organisations don’t invest in developing their people. You hire them for a job, but ultimately do not realize that for them to progress and for us to get the best out of them, we have to develop them.

Most of our best talent will leave us someday and we must understand why? It’s mostly due to a lack of career progression or better prospects. If you examine the reasons, it’s not that they cannot add more value, but we are not giving them the opportunity to do that on a more proactive basis.

We also need to find ways of retaining the talent by broad basing the opportunities that we can create for them. A company which focuses on globally as opposed to locally will be able to provide them with a broader spectrum of opportunities as well which will help the company to retain them rather than lose them.

So, unless Sri Lanka as a country and its companies step up to bigger challenges, we will continue to lose more and more people, especially to migration.

Do you think we should also be more open to inward migration?

Yes, we must have a planned intervention similar to what Singapore, Australia, the UK, USA and Canada have done for decades to source the best talent for growth and development. We must structure the same in a meaningful way so that it will complement what we have and help us fast track a solution to address our deficit in talent in critical and growth areas.

Further, we must encourage entrepreneurs especially if they are bringing investments. Most mature economies have migration programs for entrepreneurs and those with specific skills. We must structure something similar in line with our aspirations.

You explained how John Keells is leveraging Open Innovation and Crowd Sourcing as key strategies to bring in more outside-in thinking and innovation. How can other companies take advantage of these?

We launched our start-up incubator, John Keells X in 2015. We recently launched the 4th iteration of the same and witnessed the participation of almost 400 young people, many of whom were just out of college and bubbling with enthusiasm to start their own business.

For most of them, funding their startup is a challenge. The venture capital market here isn’t so mature. In response to these challenges, JKH started the same with a view of encouraging young entrepreneurs in 2015, but this time around we are looking to create a platform for open innovation for the group where valuable solutions to problems that we are trying to solve can come to us through a crowd-sourcing strategy. This paves the way for any organization to collaborate, co-innovate and co-create with a shared objective and/or outcome. As a concept, this is what we call open innovation.

On the other hand, there are certain skills which are in high demand but you may only need them for a couple of hours a day or a week. It may not make sense to hire that person full time rather you may want to just hire him for the exact duration you need him for. At John Keells IT, we extensively use this to engage expertise which is rare, both locally and internationally, towards better business outcomes. This helps the organization to get optimal value as well as for that person the liberty to work for anyone that requires his/her expertise. As a concept, this is what we call crowdsourcing.

Both of these concepts are very forward-thinking steps for an organization and whoever wishes to embrace the same must have the maturity to make it work. Both have their pluses and minuses and it’s important for each to assess the same and make a clear judgement of their applicability.

We need to look at things more liberally and look at possibilities afresh. This also would mean that our hr practices, employment laws and the way we look at employment also need to change to keep up with the times.

What do you think should be the next steps to address the economic crisis Sri Lanka now faces?

My recommendation in terms of the 7 must DOs and the order of pecking to salvage ourselves from this crisis is,

Pick a SWOT team and a leader who can command their respect and guide them to act swiftly to address the critical priorities of the country. The team must have representation from all stakeholders and subject matter expertise to deliver the best outcome in the shortest possible time.
Focus on the critical priorities such as medicine, food, gas, fuel, electricity, fertilizer, etc to give relief to people in terms of their basic necessities so that life can return to normalcy.
Speak to our Donor agencies and countries whilst working on a focused plan to increase our revenue through established streams such as Garments, Tourism, IT/BPO and encourage local entrepreneurship to focus on exports to boost our liquidity to address (1) above.
Restructure our long-term debts and have a clear program to manage our Debt/GDP gearing with the intervention of IMF and other donor agencies/ countries.
Boost our domestic entrepreneurship and production to be self-sufficient in areas such as agriculture, and dairy, and encourage value addition to our exports whilst curtailing consumption to manage our balance of payments in the short to medium term.
Enrich our bilateral relationship with key trading partners and prospects to boost our economy and seek direct investments with a view to boosting our capital inflow to expand key sectors which can contribute to the economy.
Look at constitutional reforms to bring the power back to parliament with clear accountability and responsibility matrix. Ensure that the executive, judiciary and parliament co-exist with the right checks and balances.

ECONOMYNEXT – Sri Lanka’s Power and Energy Minister Kanchana Wijesekera has suspended the license of 3 fuel bowsers belonging to state run CEYPETCO and Indian subsidiary Lanka IOC after some videos in social media of unloading fuel directly from bowsers on roads went viral.

The videos circulated in the social media which showed a fuel bowser belonging to the two firms unloading fuel and supplying into cans to private vehicles.

“License of 3 Fuel trucks have been suspended immediately by CEYPETCO and LIOC pending further investigations into the 3 Incidents reported on social media on fuel transport trucks illegally unloading fuel” Minister Wijesekera said in his twitter platform.

The Lanka IOC in a twitter message said that strict action in line with the prevalent guidelines has been initiated against the concerned transporter, who unloaded fuel from the bowser in capital Colombo.

Due to the severe fuel crisis in the country, Sri Lankan authorities have taken measures to limit the amount of fuel for private vehicles, and banned fuel hoarding as well as supplying in cans.

Sri Lanka has seen a booming black market for fuel at higher prices around the country amid acute shortage of fuel since April this year. (Colombo/ June 18/2022)

ECONOMYNEXT – The Sri Lanka Army will cultivate over 1,500 acre barren state land across the country to support the national food program to avoid a looming food crisis expected by September, a statement from the Army said.

The Army established a new committee, Green Agriculture Steering Committee of the Army (GASC), on Thursday (16) in order to supplement and promote the island’s food security programme by cultivating more than 1,500 acres of barren or abandoned state lands across the country.

Sri Lanka is facing a looming food shortage after crop harvest dropped in the last two cultivation seasons following President Gotabaya Rajapaksa banned chemical fertilizers from April last year. Many farmers have protested against the move and asked to phase out the ban with a longer duration.

The ban was later lifted in November last year, but the country was unable to import chemical fertilizers as it did not have US dollars to import.

The emergency project to be kicked off in early next month as a supportive mechanism to the government’s cultivation drive, the statement said.

In the first phase of the project, island-wide Army troops would prepare ground soil in those state lands by weeding, tilling and preparing beds for cultivation of selected seed varieties in consultation with agricultural experts, agrarian officers and knowledgeable officers in the Army Directorate of Agriculture & Livestock.

Army further said that all Security Force Headquarters round the country are currently exploring the unattended state lands and paddy fields at regional level.

The identification of state lands at regional level is to be effected in close consultation with respective provincial governors, district and divisional secretariats, land officers and Grama Seva officials before commencement of preliminary ground-preparing work in selected lands.

Sri Lanka needs around 2.4 million metric tons of rice per year and the country expects around 1.6 million metric tons in Yala season and Agriculture Minister Mahinda Amarweera has said a rice shortage may be seen by the end of 2022 and January 2023.

However, Sri Lanka has already decided to import 800,000 MT in 2022, to avoid the shortage expected by the end of the year and with the 2022/23 Maha season production, expected by February 2023, to manage the rice shortage. (Colombo/June 18/2022)

ECONOMYNEXT – Sri Lanka stocks plunged over 3 percent on Friday (17) to close at their lowest in six weeks as fuel shortage, which compelled the government to restrict the public services for two weeks, weighed on the sentiment, dealers said.

After the market closed, the Ministry of Public Administration issued a circular with limits on calling public sector employees to work for the next two weeks. The limit of public services is likely to slowdown the business activities of most of the private sector companies, market analysts said.

The main All Share Price Index (ASPI) closed 3.02 percent or 232.88 points lower at 7,472.39, its lowest close since April 27. The market for a fourth straight session.

“The market was dragged down on fears that the country will go under a lockdown due to the current fuel crisis,” a top market analyst said.

“Investors are feeling the crisis at home. We are expecting the negativity to continue in the market.”

Though a new prime minister and a new cabinet have been appointed, analysts see little progress in both economical and political front. The country is struggling to ensure continuous supply of fuel due to shortage of US dollars. The government on Thursday declared holiday for schools and public sector for Friday due to fuel-shortage led transport concerns.

The more liquid S&P SL20 index fell 3.83 percent or 94.44 points to 2,368.65.

The day’s turnover was 1.2 million rupees, a third of this year’s daily average of 3.6 billion rupees.

Foreign investors sold a net of 17 million rupees’ worth of shares on Friday. The market has witnessed a total foreign outflow of 996 million rupees so far this year.

The market has so far lost 7.7 percent in June after gaining 6 percent in May. It lost 23 percent in April followed by 14.5 percent fall in March.

The market has lost 38.8 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

Sri Lanka’s sovereign debt default has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

All Share Price Index was mainly dragged down by Expolanka, which lost 7.7 percent to 160.50 rupees a share.

LOLC Holdings fell 8 percent to 418.50 rupees a share, while Browns Investment slipped 8 percent to 7.90 rupees a share. (Colombo/June17/2022)

ECONOMYNEXT – Hundreds of Sri Lankans this week demanded the cancellation of a 500 million US dollar wind power deal with India’s Adani group due to possible corruption as the project was not opened for competitive bidding.

The protest was held for over three hours starting near a shopping mall –  the Majestic City, in the capital Colombo and then moved to the Power and Energy Ministry and Indian High Commission premises in the neighbourhood.

Adani Group, a multinational diversified conglomerate which has business interests ranging from port management to power generation and renewable energy to natural gas, was awarded the deal in 2021 to generate 500 MW of power using wind mills in the island nation’s northern coast.

The project was resisted by some trade unions at the state-run utility provider Ceylon Electricity Board (CEB) and activists groups claim that the project has bypassed normal tender procedures and was clandestinely signed between President Gotabaya Rajapaksa’s government and the owner of the Adani group who is a close ally of Indian Prime Minister Narendra Modi.

“We are for renewable energy, but we are against shady deals, non-transparency and lack of accountability,” Amanda Wanduragala, a youth protester told EconomyNext.

“This tender should have been given to the lowest bidder, so Adani shouldn’t get it.

“This deal will not be beneficial to us, simply because we can’t give Adani power over our energy sector, and because this is turning into a monopoly. Our country is already suffering and we can’t afford to sell ourselves even more to India,” she said.

Many of the youth came from the group that has been protesting for the last 75 days demanding that President Rajapaksa resign, participants told EconomyNext.

“We are here to tell Adani that although we want renewable energy and although the country needs foreign direct investment (FDI) in order to get through the crisis, we don’t want Adani,” another protester told EconomyNext asking not to be named.

“The way out of this crisis is not more corrupt deals through the backdoor. We want to tell [Rajapasa] and Modi not to push non-transparent deals. The law of this country has been [sidestepped] to push through the wind project.”

Sri Lanka is facing one of its worst economic crises in history, and India has helped with over 3 billion US dollars in credit lines and by delaying the island nation’s import payments.

Some of the protesters said that India should not use Sri Lanka’s vulnerable position to take advantage in business deals.

Melanie Gunathilake, a 26-year old protester, said they were against the allegedly corrupt deal signed by the Rajapaksa government and Adani Power supported by the Modi government.

“Sri Lanka definitely needs renewable energy, and we want to move to a sustainable future but that shouldn’t happen through a corrupt deal,” she said.

The protest comes amid a cold war between India and China in the island nation for strategic infrastructure projects. It was also held nearly a week after the government amended the Sri Lanka Electricity Act to entertain unsolicited projects, replacing the earlier competitive bidding process.

In early 2021, aggressive trade union protests against leasing a Colombo Port terminal to India and Japan forced the government to reverse that deal. However, the Rajapaksa government later compromised with India and gave another 800 million US dollar longer terminal deal to  theAdani group last year.

India has raised security concerns over increasing Chinese influence in Sri Lanka as many infrastructure projects are given to China financed by Beijing.

China was chosen to handle renewable energy projects in Sri Lanka’s northern islands through the standard tender process, but the Sri Lanka government later cancelled them after India protested against China coming close to its southern boarder. (Colombo/Jun16/2022)

ECONOMYNEXT – Activities at several key economic sectors requiring transport are slowly grinding to a halt as forex shortages from continued money printing is making it difficult to finance oil imports, hitting passenger and goods transport.

Sri Lanka’s rupee collapsed from 200 to 360 to the US dollar after two years of money printing and a failed float with a surrender requirement. Liquidity injections and interventions are continuing at the lower level with dollars borrowed from India.

Fuel and gas queues are extending with exasperated customers clashing with police and others who jump the queues.

As passenger and goods transport are disrupted economic sectors that depend on it including farming and tourism are feeling the pinch. While fishermen are provided some fuel on priority for boats are also depended on trucking and domestic.

Thousands of private buses are off the road without fuel. State-run trains which are supplied with fuel are filled to capacity.

It is not clear when the next petrol ship will come with banks unable to open letters of credit, as people using cars and motorcycles languish in queus, but the last diesel ship from an Indian credit line has now arrived in the country.

Related Sri Lanka fuel queues claim two new deaths, taking total to 10

At least two persons died in fuel queues on June 17.

Public Transport

To save fuel the government has closed state offices on Friday and asked them to grow vegetables instead with fertilizer and diesel imports hurting commercial agriculture.

RelatedSri Lanka state offices shut on Fridays for home garden leave

Minister of Transportation Bandula Gunawardena told reporters Thursday, that fuel for private buses will be allocated from two fuel stations in Bastian Road in the capital Colombo but, television footage showed that buses in queues with no fuel.

Gemunu Wijeratne, President of Lanka Private Bus Owners Association says buses and drivers are spending most of their time on diesel queues instead of driving on the road.

Wijeratne said some priority has been promised for public transport and if state-run Ceylon Petroleum Corporation is able to allocate 600,000 liters of diesel per day for the buses, transportation can facilitate 40 million people while running at 50 percent of the capacity.

“With the ministry distributing the incoming fuel according to a priority list the diesel we are getting will be sufficient for the next two weeks,” Wijeratne told reporters on June 16.

“We heard that the CPC does not have any Petrol at the moment making the public transport the main transport for people. If we get 600,000 litres per day, we can facilitate 40 million people who use transport. That is also by operating only 50 percent of the capacity.”

There are emerging complaints of absenteeism and some firms are encouraging work from home.

Goods Transport

Farming produce that is coming to main cities and economic centre are disrupted from diesel shortages.

Also hit are goods that move to the provinces from central wholesale markets in the capital including imports.

“We are coming from Matara,” a crew member from a dry food truck operating from Colombo to the Southern Province, told EconomyNext.

“We stayed for several days to get the diesel to come on this trip from Matara, after we go today, we are cannot confirmation whether we will return tomorrow or not, because of diesel shortage”.

Sri Lanka’s food prices have risen 57 percent over a year according to official data and rice prices have doubled amid import restrictions.

Interventionist soft-peg

The prices of some fish prices have trebled in some cases after the rupee collapsed against the US dollar following monetary and fiscal ‘stimulus’.

The countries economic woes running back to 1950 can be traced to its intermediate regime central bank built by a US money doctor in the style of Argentina’s BCRA. (How Sri Lanka, Latin America was busted by Fed money doctors creating strongmen, anti-Americanism)

Under ‘flexible’ policy its anchor conflicts inherent in intermediate regimes (targeting exchange rates to collect or sell forex reserves while printing money to target interest rates) worsened from 2015.

Sri Lanka is undergoing the worst curency crisis in the history of its central bank after it mis-targeted interest rates under ‘flexible inflation targeting’ with a ‘flexible exchange rate’ an (extreme soft-peg with aggressive floating rate style monetary policy).

Since intensified flexible policy began in 2015 the rupee has fallen from 131 to 360 in three consecutive currency crises where forex shortages were covered by foreign borrowings.

In the latest crisis, after defaulting on foreign debt, authorities are looking for 6 billion dollars in new borrowings.

Fishing

Energy Minister Kanchana Wijesekera says fuel is distributed daily to fishery harbhours though it may not be the full requirement as each multi-day fishing boat requires several thousand litres for a trip.

When boats return, the transport of fish is also threatened.

The Ministry of Fisheries said all efforts were being made to supply kerosene and diesel to fishermen though the volumes were sharply below requirements.

“We are currently supplying fuel according to the stocks we receive, to the fishing fuel station around the country,” Nelson Edirisinghe, secretary to the ministry of fisheries told EconomyNext.

“However, we doubt whether we can meet the entire demand”

Fishing boats need around 900,000 liters of kerosene a day but the Ceylon Fishery Harbhours Corporation gets only around 300,000, Edirisinghe said.

“So the distribution is being done according to the supply we get. Some harbors do not have a fuel station, so they are being supplied by other fuel stations or in alternative ways” Edirisinghe said.

Fish prices are moving up as the currency collapse by the soft-pegged central bank alters the price structure of the economy.

Minister of Fisheries, Douglas Devananda had discussed with the exporters in the industry to obtain the necessary dollars to purchase fuel needed by the fishing boats in an attempt to dollarize the sector.

Partial dollarization is already taking place in the economy.

This week Energy Minister Wijesekera said jet fuel imports and sales which are about 50 million US dollars will be outsourced to a third party reducing the foreign exchange burden on the CPC. (Colombo/June17/2022 – Update II)

COLOMBO (News 1st); The Government will let no one suffer in hunger, says the Minister of Agriculture, Mahinda Amaraweera.  Speaking at a media briefing convened today (16), the Minister of Agriculture answered queries regarding the high price of rice, the shortage of rice and the fertilizer crisis. The Minister assured that his Ministry is directly working Government would let no one suffer in hunger: Minister Amaraweera

ECONOMYNEXT – Sri Lanka is in the process to mend severed ties with Japan after the island nation unilaterally cancelled a 1.5 billion US dollar light rail transit (LRT) and East Container Terminal (ECT) projects as the crisis-hit South Asian nation is seeking international help to come out of its economic downturn amid a political crisis.

Higher government officials and ruling Sri Lanka Podujana Peramuna (SLPP) members have told EconomyNext that most foreign countries were hesitant to help Sri Lanka unlike in the past because some harsh ‘undiplomatic’ experiences in the past.

A former SLPP cabinet minister has said some countries have indirectly told the government that they would not help until President Mahinda Rajapaksa and his family members are in power.

Foreign Minister G L Peiris at a meeting with Miyake Shingo, Parliamentary Vice Minister for Foreign Affairs of Japan, said “the relationship with Japan is vital for Sri Lanka,” after he met the Japanese high official on the sidelines of the 50th session of the Human Rights Council.

Peiris noted that, over the decades, Japan has been a close partner of Sri Lanka, and “expressed appreciation for the assistance provided, particularly in the areas of skills development, computer technology, the construction of the Sri Jayawardenepura Hospital, assistance to the Rupavahini Corporation, the significant assistance provided recently for medical and pharmaceutical items, as well as Japan’s supportive stance on Sri Lanka”, the island nation’s Foreign Ministry said in a statement.

“He also recalled the support extended by Sri Lanka to Japan at the San Francisco Conference at the conclusion of World War II. Sri Lanka wished to expand cooperation with Japan in the areas of digitalization, carbon credit, and ocean related activities including coast conservation, fisheries and global warming. Reference was also made to exploring cooperation in areas coming under the purview of the World Trade Organisation.”

The government under President Gotabaya Rajapaksa, which was close to China earlier, unilaterally suspended a 1.5 billion US dollar LRT project and 500 million US dollar ECT project, which is involved with a tripartite deal with India as well.

Shingo noted that Japan, too, wished to deepen and strengthen cooperation with Sri Lanka in international fora.

Both countries are celebrating 70th year of diplomatic relations this year.

“He…. expressed the hope that long before the 100 year celebration, the relations between the two countries would be elevated to an even higher level. He expressed interest in furthering cooperation with Sri Lanka in the areas mentioned,” Sri Lankan Foreign Ministry said.

Japan has been the top lender for Sri Lanka under its concessionary funding and has poured billions of yens to Sri Lanka’s main Colombo port and many other infrastructure projects.

Sri Lanka is facing its worst economic crisis in the post-independent era. Many countries have pledged help but said only they can do that once Sri Lanka ensures an International Monetary Fund programme after renegotiations with its creditors.

The diplomatic ties with Japan was severed after Rajapaksa’s decision to cancel the key projects which were signed under the previous government.

Japan played a key role when Sri Lanka faced an economic collapse in 2001. It helped to host a donor forum for Sri Lanka and raise 4.5 billion US dollar in 2003 to rebuild war ravaged infrastructure during a ceasefire agreement in the island nation’s civil war. But the country was unable to use the funding fully as there was a government change in 2004.  (Colombo/June 16/2022)

ECONOMYNEXT – Sri Lanka has decided to import 50,000 metric tons of rice using what remains of a one billion US dollar credit line signed in March 2022 for essential commodities, Prime Minister Ranil Wickremesinghe’s office said, amid warnings of an impending food crisis.

The decision was taken at a discussion held at the Prime Minister’s office on Thursday, June 16, to allocate funds for this purpose to the State Trading Corporation under the the Indian loan assistance programme.

“This is expected to avert a possible rice shortage in the future and to curb the abnormal rise in rice prices,” the PM’s office said.

The Indian credit line was signed in March for the purchase of food and medicines.

Earlier on Thursday, Agriculture Minister Mahinda Amaraweera claimed there will be no shortage in rice in the country as the number of hectares being cultivated are higher than anticipated. He said, however, that there will be a shortage by the end of the year which will be managed with the production of  the ‘Maha’ cultivation season that will arrive in February.

Sri Lanka is facing a looming food crisis because farmers could not produce adequate food after President Gotabaya Rajapaksa banned inorganic fertilizer in the last cultivation season. Input shortages this year have also adversely affected the sector.

Inflation coming from the collapse of the currency after two years of money printing has pushed up both domestically made foods and imports up.

Prime Minister Ranil Wickremesinghe has said a food shortage is imminent from August. He has already held discussions over obtaining help from the World Food Programme to prevent a food crisis. (Colombo/Jun16/2022)

 

TEA CENTENARY YEAR SOUVENIR. Pioneers of the Tea Industry in Ceylon (A) JAMES TAYLOR James Taylor the father of the Ceylon Tea Industry opend up the first...