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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Saturday, May 07, 2005

How best to achieve the Millennium Development Goals

Development Gateway: "How Best to achieve the MDGs? A first paper (Achieving the Millennium Development Goals: What's wrong with existing analytical models?) argues that existing approaches to achieving the MDGs are unreliable. In particular, estimates of the costs and benefits of alternative strategies derive from implausible and restrictive assumptions, often depend on poor quality data, and are presented without adequate recognition of the presence of uncertainties concerning the future. A second article (Peer and Partner Review: A Practical Approach to Achieving the MDGs) offers an alternative approach to strategic planning for the MDGs that could be implemented through a process of periodic peer-and-partner review. While the arguments developed in each paper can be read separately, these articles should be considered as companions. The outputs of this research is available at: www.millenniumdevelopmentgoals.org "
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Where there is no information: IDP vulnerability in uncleared areas

ReliefWeb - Document Preview - Where there is no information: IDP vulnerability in Sri Lanka's uncleared areas: "Source: ODI - Humanitarian Practice Network
Date: 05 May 2005 By Robert Muggah, Social Science Research Council/Graduate Institute of International Studies, and Danesh Jayatilaka, consultant

Despite a ceasefire agreement in February 2002 and a gradual transition from war to peace, Sri Lanka still has a significant internally displaced population. Although numbers have declined considerably in the past two years, there are still some 360,000 internally displaced people (IDPs) -- including, according to UNHCR, over 80,000 in nearly 300 welfare centres in the north and east. While there have been numerous attempts to describe and analyse this population, very little is actually known about the risks and vulnerabilities facing Sri Lanka's IDPs, in particular the 200,000 or so in parts of the country still nominally controlled by the Liberation Tigers of Tamil Eelam (LTTE) -- the so-called 'uncleared' (according to the government) or 'liberated' (according to the LTTE) areas.

There have been several attempts to appraise the risks and vulnerabilities facing Sri Lanka's IDPs, including studies by the US Committee for Refugees, the Colombo-based Centre for Policy Alternatives and Oxfam-GB's Listening to the Displaced project, as well as work by individual forced-migration analysts like Roberta Cohen, Marc Vincent and Birgitte Sorensen. The UN's Special Representative for IDPs, Francis Deng, visited the country in 1993, and a team of specialists from OCHA issued a report in 2002. Moreover, the UNHCR has undertaken a range of demographic surveys of IDPs together with the responsible ministries, while the World Bank has launched a major socio-economic assessment of 'vulnerable groups' in the north and east. However, the majority of these studies and initiatives are undermined by the logistical and resource constraints typical to work in conflict and post-conflict contexts, and few, if any, have paid adequate attention to the situation of IDPs in Sri Lanka's 'liberated' areas.

This article describes an initiative in 2002 to measure the protection and assistance needs of IDPs in Sri Lanka's 'uncleared' areas. The project's central goal was to expand the analytical lens in relation to assessing and ultimately strengthening inter-agency approaches to IDP protection and assistance. Over a short period, it demonstrated a capacity for generating responsive and policy-oriented analysis. By appraising protection needs in situ, the project introduced a pragmatic strategy to generate detailed information on the risks and needs facing an extraordinarily diverse and heterogeneous population. For example, the project found that existing approaches to 'protection' and 'assistance' did not meet Sphere standards, and that IDPs in so-called 'liberated' areas experienced differentiated access to public goods such as water, schooling and health services. It also detected considerable confusion in relation to 'programmatic' responses to IDP 'protection' and 'assistance': interventions appeared in some cases to have disempowered IDPs and fuelled mistrust and resistance to collaboration with humanitarian agencies.

Analysing displacement

The UN's Guiding Principles on Internal Displacement 'identify the rights and guarantees relevant to the protection of persons from forced displacement'. The 30 principles reflect progressive thinking in international human rights law, humanitarian law and refugee law, and offer normative and prescriptive guidelines for intervention. Although there is dispute over when displacement actually ends, and over the responsibilities associated with the provision of IDPs' rights, there is consensus that the displaced face a range of risks and vulnerabilities that demand attention. But what are these risks? How are they actually experienced? Although Sri Lanka has seen numerous attempts to apply the Guiding Principles in practice, as an analytical tool they are unwieldy, and efforts to operationalise the Principles as a toolkit for research have been only partially successful.

Among the many challenges facing those responding to internal displacement is the question of information: despite the consensus on the rights and entitlements of internally displaced people, little is actually known about the types and scale of vulnerability they face. Surveillance capacities in areas affected by war-induced displacement are often limited, if they exist at all, and local resources are rarely up to gathering the kind of data required. In the rare cases where action research is undertaken, it is often case- or sector-specific, or in the form of one-off appraisals. The full dimensions of displacement are rarely assessed holistically. Designing an IDP vulnerability assessment tool

Against this background, the Brookings Institute Project on IDPs commissioned the Consortium of Humanitarian Agencies (CHA) in Sri Lanka to undertake a low-cost and focused assessment of the risks and vulnerabilities facing IDPs. The vulnerability assessment study, which was part of a larger IDP protection and assistance programme implemented by CHA, was conducted over 12 months, between January and December 2002. Its objective was to generate valid and appropriate data on IDPs residing outside government areas. Eight districts were targeted in Sri Lanka's north and east: Trincomalee, Vavuniya, Killinochchi, Mullativue, Jaffna, Mannar, Batticaloa and Ampara. At the time of the study, these IDPs comprised a quarter of the country's total caseload.

The assessment tool was developed in consultation with representatives from the humanitarian and development sector, including UN agencies (e.g. WFP, UNICEF and UNHCR), the Sri Lankan government, Colombo University, independent specialists and international NGOs (e.g. Save the Children-Norway, Action Contre la Faim and Helvitas). Two additional observers were also involved from Oxfam-GB and Save the Children-UK.

The approach envisaged departed from the Guiding Principles in that it used just eight key variables (as opposed to 30 principles), devised by a 'project formulation group'. These variables covered core elements of IDP protection and assistance: health, food, education, water, sanitation, psychosocial health, shelter and safe movement. Each variable included quantitative and qualitative indicators thought to be important in the Sri Lankan context. These indicators were intended to be illustrative, rather than exhaustive.

Officials from the North East Provincial Council (NEPC) were seconded to the project and deployed to each district in order to collect data on a monthly basis. The data was then analysed by a Colombo-based advisory group. In under 12 months, some 250 representatives of local NGOs, community-based organisations (CBOs) and civil servants involved with IDP protection and assistance-related work in the uncleared areas were trained in research and data collection methods.

Each of the eight assessment sectors included a data-gathering tool and a corresponding training module. The NEPC and Government Agents from the project districts provided coordination and offered recommendations as to participant selection. The LTTE was represented by the Tamil Rehabilitation Organisation (TRO), which was chiefly responsible for organising training workshops and other field arrangements. Other non-governmental agencies such as FORUT, Helvitas, SEDEC and Caritas Sri Lanka and 'District Coordinators' from the CHA provided logistical support and training resources, and the NEPC oversaw and directed the data-gathering team.

Some reflections

The project was extremely ambitious, and a number of key obstacles prevented the smooth and effective generation of data and dissemination anticipated at the project's inception. The skills and capacities of the locally recruited participants were inadequate to appraise the primary data, and in Sri Lanka, as elsewhere, many humanitarian agencies are themselves unable to invest enough time and resources to carefully consider 'findings' from the field. Despite notable exceptions, the emphasis on delivery often militates against reflection and empirical analysis. Without adequate support among senior managers, whatever evidence is ultimately marshalled often goes unnoticed. Although the project devoted considerable energy to analysis by creating the advisory group in Colombo, the full body found it difficult to meet on a regular basis. Indeed, a strong case could be made for a smaller, more focused consultative group, comprising those who are most supportive of the project, in order to increase the transmission and dissemination of information.

But the fact remains that accurate information is vital for informed policy-making. The project demonstrated a capacity to generate voluminous data over a short period, particularly in areas where data is hard to come by. But it was also the case that, despite a significant investment of time and energy in training, the 'data collectors' were not always equipped to carry out the assessment to completion. Ultimately, the generation of information is a necessary, but insufficient, condition for progressive policy development in relation to protecting and assisting IDPs. Analysis and dissemination are crucial, if frequently overlooked, elements of any information management effort. Conclusion

Good information is vital for the articulation of good policy and programming, especially for displaced populations in inaccessible areas. Good policy is, of course, contingent on another intervening variable -- political will.

The Guiding Principles offer a useful normative platform for understanding the risks and vulnerabilities facing IDPs, as well as their responses to them. This project created a framework to appraise protection and assistance needs in situ. In this way, it introduced a novel, cost-effective and pragmatic strategy to generate detailed information on specific populations over a relatively short period. But effective information management requires more than a capacity to frame the issue. It also demands considerable attention to 'downstream' activities, namely analysis and dissemination. Agencies need to devise creative mechanisms to enable them to appraise the realities of IDPs in conflict and post-conflict societies. This project offers a novel template to at least begin asking the right questions.

Robert Muggah is a Global Security Co-operation Fellow with the Social Science Research Council, New York. He is also project manager of the Small Arms Survey at the Graduate Institute of International Studies, and a doctoral candidate at the University of Oxford. Danesh Jayatilaka is a consultant based in Colombo. He has worked for Care-USA, GTZ and a number of humanitarian agencies in Sri Lanka.

References and further reading

Rupasingha Ariyarantne, 'Sri Lanka: On the Edge of Displacement', Forced Migration Review, no. 17, May 2003, www.fmreview.org/FMRpdfs/FMR17/fmr17.14.pdf.

Cathrine Brun, 'Forced Migrants, Refugees or IDPs? Consequences of Labelling in Identity Formation and Entitlements in Sri Lanka', Acta Geographica, Series B No. 2 (Trondheim: Norwegian University of Science and Technology, 2003).

Cathrine Brun, 'Newcomers and Hosts: Muslim Internally Displaced Persons and Their Hosts in Sri Lanka -- Challenges for Social Research', paper, Norwegian University of Science and Technology Conference on Recovery and Development after Conflict and Disaster, April 2000.

Michael Cernea and Christopher McDowell, 'Reconstructing Resettlers and Refugees Livelihoods', in Cernea and McDowell (eds), Risks and Reconstruction: Experiences of Resettlers and Refugees (Washington DC: World Bank, 2000).

CHA, A Toolkit for Dissemination, Advocacy and Analysis: What You Can Do (Colombo: CHA, 2001).

Francis Deng and Roberta Cohen (eds), The Forsaken People: Case Studies of the Internally Displaced (Washington DC: Brookings Institute, 1998).

Danesh Jayatilaka, A Report for the Brookings-SAIS Project on Internal Displacement (Colombo: CHA, 2003).

UN, Guiding Principles on Internal Displacement, Doc E/CN.4/1998/53/Add.2, 11 February 1998.

OCHA, The Situation of IDPs in Sri Lanka: Report of a Mission by the Internal Displacement Unit, April 2002.

Marc Vincent and Birgitte Sorensen, Caught Between Borders: Response Strategies of the Internally Displaced (London: Pluto Press, 2001). "

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Humanitarian Situation Report: 29 Apr - 5 May 2005

ReliefWeb - Document Preview - Humanitarian Situation Report - Sri Lanka: 29 Apr - 5 May 2005: "Source: United Nations Office for the Coordination of Humanitarian Affairs (OCHA)
Date: 05 May 2005

Main challenges and response

In Galle district, the government and UN agencies and NGOs are assessing the daily migration patterns of IDPs from shelter camps in the coastal belt to camps inland during the evenings. In addition, many IDPs are not residing in the camps. Monitoring of camp sites and tents is being conducted by various organizations. Decommissioning of some tents on the coastal belt, and upgrading of low-grade tents to more durable ones are being considered to stem the daily migration.

In Killinochchi, according to UNICEF, 80 percent of IDPs previously in welfare camps are now housed in a total of 39 transitional camps in Mullaitivu and Vadamarachchy East. Each family housed at these sites has its own shelter with access to adequate water and sanitation facilities, community halls, children’s playgrounds, recreational facilities, pre-school facilities and psychosocial support. According to UNICEF, Jaffna IDP families that were previously hosted with friends and relatives are now approaching local authorities and registering themselves for a place in the newly constructed transitional shelter sites. According to government authorities in Jaffna, some 525 cases of this kind have been registered thus far.


IOM concluded the establishment of a psycho-social pilot project in Matara. The project included deployment of three social mobilizers with the aim of creating a self-sustaining participatory psychosocial programme within IOM supported IDP camps in the district. Following successful implementation, the international mobilizers handed over the programme to a local psycho-social field officer who was hired to support the programme in the future. The international social mobilizers were re-dispatched to support the rapid implementation of grassroots level psychosocial activities in tsunami-affected communities in Ampara and Trincomalee districts.

Through its partners, UNICEF is supporting nearly 50 different psychosocial activities in the districts. Over half of these projects are in direct support of tsunami-affected populations. Tsunami-related activities include support for the coordination of activities, training of public health workers, assistance to family support workers, financing of community support programmes, the establishment of child-friendly spaces and children’s clubs in camps, support for play activities, theatre, music and dance, the facilitation of youth and child-tochild activities, and the supply of recreational items.

UNICEF partners in psychosocial per district
(as of 26 April 2005)
Ampara Peace and Community Action, Rural Development Foundation, SHADE, Mental Health Unit
Batticaloa Eastern Human and Economic Development (ESCO), Third Eye, Mental Health Unit
Galle Faculty of Medicine: University of Ruhuna, Sarovdaya, MDC
Hambantota Faculty of Medicine: University of Ruhuna, Sarovdaya, MDC
Jaffna Ahavoli, FRC, WHC, MDT, JSAC, Shanthiham
Killinochchi/Mullativu Aesthetic Society, Annai Illam, Working Women’s Development Foundation (WWDF), Centre for Health Care (CHC)
Matara Faculty of Medicine: University of Ruhuna, Sarovdaya, MDC
Trincomalee Eastern Human and Economic Development (EHED), AHAM, ESCO, Centre for Performing Arts, Mental Health Unit, SSED
Vavuniya SHADE, Family Centre

Water and sanitation

In Trincomalee, UNICEF, in collaboration with Shelter for Life and Help from Germany, is supporting the construction of water and sanitation facilities for 200 IDP families in Annal Nagar. The families are currently residing in different temporary camps in Kinniya DS division. Shelter for Life will establish temporary shelters on the beneficiaries’ original land in order that the families may live there whilst their permanent houses are constructed on the same sites. For this reason, UNICEF will focus on providing permanent facilities for these families. In particular, UNICEF will support the construction of 200 permanent toilets, provision of an as yet undetermined number of 1,000 litre plastic water tanks, frequent filling of water tanks installed through January 2006 (if required), the extension of the existing water supply system to the sites, and the launching of a hygiene promotion campaign.

Over coming months, UNICEF plans to construct an additional 4,088 temporary and permanent toilets, install another 5,906 water points, and build a further 1,587 bathing facilities. Some of the challenges facing UNICEF and its partners during the shift from relief to recovery include: the construction of adequate water and sanitation facilities for all newly established transitional camps, the establishment of permanent water and sanitation facilities in schools, health centres and communities, the identification of qualified partners to conduct water and sanitation works, the proper maintenance of established facilities, the launching of participatory hygiene campaigns, and support for national capacity building.

Non-food items and shelter

UNHCR is building transitional shelter units in Jaffna, Ampara and Trincomalee Districts. As of 25 April 210 of the 530 shelters planned for Jaffna have been completed. In Ampara, a UNHCR pilot project of 42 shelters was completed in the first week of April. Another 2,500 are now underway, with a possible 1,500 to follow. In Trincomalee, plans are underway to provide transitional shelter for 367 families who are victims of both the conflict and the tsunami.

Construction of transitional houses by IOM for 394 tsunami-affected families is on-going with 14 houses being built in Colombo, 50 in Kalutara, 15 in Matara, 113 in Ampara, 98 in Batticaloa and 104 in Trincomalee. To date a total of 134 families have moved into fully completed transitional houses. Land has been allocated and beneficiaries identified for IOM to construct 2,459 transitional family accommodations in the six districts. IOM will undertake further construction as land is allocated. Much of the basic building materials are purchased locally in the districts helping to revive local economies.

Since the tsunami, UNHCR has distributed 478,700 non-food relief items (NFRI) to beneficiaries affected by the tsunami (at a total value of US$ 1.189 million). The NFRIs include: towels, soap, buckets, cooking equipment and clothing.


Forty-five widowed-mat weavers in Batticaloa district received replacement equipment from IOM to resume their livelihoods and begin to support their families again. The package of assistance included a mat weaving machine, bundles of natural grass (enough to make 12 mats), dye, and a pot to boil the natural grass. In addition, in Batticaloa, 150 women are benefiting from the establishment of community-sewing centers and sewing workshops in four IOM supported camps in Batticaloa district.

Save the Children is assisting nine beneficiaries in Matara district in the shoe-making sector to purchase shoe moulds to get their shoe manufacturing operations back in business. Also in Matara district a workshop was recently held for 100 youth who are the beneficiaries of the block-making (bricks) machines provided as part of Save the Children’s livelihood assistance there. It’s partner in this programme is the District Federation of Youth Council. A training programme on brick-making started on 1 May.


Following the piloting of tsunami awareness materials in affected areas of the North, East and South, UNICEF has reviewed the feedback and decided to add another three to four pictures to the programme in order to provide more detailed information about tsunamis and to promote environmental protection. The facilitator guides will also be revised to take into account the second tsunami scare at the end of March and to encourage communities and schools to develop protection and evacuation strategies. At the request of the Ministry of Education, UNICEF will also publish a small handout that teachers can distribute to parents and students. The format for this handout will be adapted from that already developed by UNICEF Indonesia.

The Batticaloa Protection Taskforce, which consists of government representatives, UN agencies and NGOs, is tracking and responding to specific land rights issues that are already leading to complications during the reconstruction and relocation phase, particularly with regard to those who do not possess land deeds as well as legal entitlements for women. In this context, the Women’s Committee for Disaster Management (WCDM) cited the example of 30 out of 374 IDP families from Thirichendur who currently live in Zaira College but

never had legal title to their land in Thirichendur and will thus not be eligible for compensation. These families are unsure about their future and are not given alternative solutions. On the issue of equal entitlements, WCDM is also advocating for compensation money to be paid into a joint husband and wife bank account.


IOM currently maintains a vehicle fleet of 72 lorries and provides free transport assistance to government agencies, international organizations, NGOs and other organizations. In recent weeks alone, fifty-one IOM lorries carrying various building materials were dispatched to different IOM construction sites throughout the country. In the same period, IOM lorries transported relief items and construction materials to tsunami-affected areas on behalf of various agencies on 140 occasions. They included 72 lorries of medicines and medical equipment for the Ministry of Health to various affected areas throughout the country for the Ministry of Health, 25 lorries of food items, milk powder, water and other relief for the Department of Social Services, 6 lorries transported food, water and milk powder on behalf of the Prime Minister’s Office, 12 to Ampara and Batticaloa districts for CARE International, 10 lorries to Batticaloa, Ampara and Vavuniya districts for UNHCR, 5 to Batticaloa and Ampara districts for OXFAM, 4 to Balapitiya, Matara and Hambantota Hospitals for the Italian Civil Protection Department (ICPD), 4 to Trincomalee and Batticaloa for World University Service Canada (WUSC), and 1 to Batticaloa for Merlin (Medical Relief International). In addition to the heavy trucking assistance, IOM is presently providing 14 vehicles and 40 motorbikes to the Transitional Accommodation Project (TAP) offices throughout the country, 5 vans to Commissioner General for Essential Services (CGES) and 3 to the Task Force For Relief (TAFOR). "

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Friday, May 06, 2005

The role of ‘Management Corporation Concept’ in housing apartments

The Island: "06/05/2005, The role of ‘Management Corporation Concept’ in state constructed housing apartments By Athula Wimalaratne B.Sc. Eng. (Hons.), Dip. C. Sc. (Hons.), E.D.B.A., C. Eng., MIE (SL)

In order to inculcate and enhance certain common attitudes of the occupants in state constructed housing apartments the concept of ‘Management Corporation’ has to play a vital role. Unfortunately most of them still believe merely it has an additional overburden to their financial commitments. Most of the issues and disputes in state constructed Housing apartments would have been overcome by being optimistic with the Management Corporation concept and even now it is not too late to rectify the situation.

Most of the instances minor issues and misconducts of some of the occupants result major disputes creating complex situations and unnecessary financial involvements in rectifying resulted implications to common elements and common amenities as well.

Can a housing unit be used for any purpose, which tarnishes the name or standard of other condominium parcel owners?. Can any fuel or material, which produces bad smell or smoke disturbing others be used? Garbage or waste, can it inconvenience others? Can one have pets disturbing others? Can anybody disturb or misuse common areas and elements? Why not obliged to certain discipline to maintain the common interest? Can you alone stop or control or resist some ones misconduct or -misbehaviour or selfish living? Don’t you like if you all can resist and control all these activities for the well being of all occupants as per joint decisions as a unite commitment.

Activating the Management Corporation concept is vital in this regard. It has so many duties to perform other than financial ones. Most of the disputes in your Housing Schemes can easily be solved by yourselves by being active members of your own Management Corporation.

When you have ownership of your housing unit you become a member of your Management Corporation whether it is active or not. ‘It is your right and duty to play an active roll at the Management Corporation for all of your benefits. If you cannot find enough active members to form an active Management Corporation due to non availability of housing unit owners, still the occupiers can form and participate for Management Corporation activities with the written consent of the respective unit owners or as authorized by relevant authorities. If some unit owners don’t support Management Corporation activities Management Corporation has the right to force them to do so or to deprive the privileges of using certain common elements and common amenities by those non corporative members.

It is also noted that Unauthorized Construction is one of the major issues in state constructed housing apartments. Unit owners in general loose their common areas and common elements due to illegal constructions of some people.

The Management Corporation too has the sole authority to resist and restrict unauthorized constructions? By uniting in decisions coming through Management Corporation will assist relevant government authorities also in their actions in removing unauthorized structures? By blaming relevant government bodies only is insufficient.

As stated in Common Amenities Board (Amendment) Act No. 24 of 2003, one of the objective of Condominium Management Authority is to remove all unauthorized construction erected or carried out by the respective owners or occupiers of such Condominium parcels or by any person, contrary to the registered Condominium Plan of the Condominium Property or the registered Semi Condominium Plan of the Semi Condominium Property.

If a property has no Registered Condominium Plan or the Registered Semi Condominium Plan your undivided shared ownership on common elements and common amenities are not properly covered. Then who owns common areas? Can Condominium Management Authority remove unauthorized construction on unregistered Condominiums as per CMA objectives?

It is very clear that approval of the relevant authorities. (UDA/CMC) for such alterations, redevelopment and amalgamation to be effected to the approved building Plan to be forwarded to Condominium Management Authority for applying certificate for common elements and common amenities. If initial local authority approvals are not available Condominium Management Authority is not in a position to issue CMA Certificate.

In other words if the new structures are contrary to approved Building Plan whether the original property has a Registered Condominium Plan or not more than Condominium Management Authority requirements those unauthorized constructions violate the basic local planning authority regulation and requirements and those relevant authorities too involve in acting against them.

There are acceptable ways of doing an amalgamation or redevelopment as per prevailing laws in the Country. For a Condominium Property amalgamation or a redevelopment of a common area it is mandatory to have the Management Corporation consent to start with. Then they are to be approved by relevant Local authorities such as Urban Development Authority and Local Councils before applying for the Condominium Management Authority certificate for re-developments or amalgamation. Further without Condominium Management Authority Certificate for alterations the amended condominium plan with re-development or amalgamation can not be registered.

However without activating Management Corporations it may be difficult to rectify all these issues promptly. Of course if those who are living with common elements and common amenities find it difficult to establish common attitudes, Can they achieve a common success? It is not too late to come out with common attitudes, common ideas and common demands for your common benefits whereby can you neglect Management Corporation concept any more?

The writer is the General Manager of the Condominium Management Authority, Ministry of Housing Construction Industry, Eastern Province Education and Irrigation Development.

He is a Chartered Civil Engineer ; a member of the Institute of Engineers (Sri Lanka) & Institution of Project Managers (Sri Lanka). He had worked for many reputed overseas Companies & conducted several Awareness Programmes to regulate continual enhancement of habitable Condominium Properties.

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Twin dragons CPC, CEB burn public funds

Net Govt. borrowing in 2004 soars to Rs. 117 b from original target of Rs. 65 b;
Operational losses of CEB, CPC key contributor; public sector debt now well over GDP

Daily Mirror: Financial Times: "05/05/2005 By Nisthar Cassim

The twin dragons - Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) in 2004 literally sucked public funds putting the Government’s borrowing program off target.

Last year the public sector deficit increased to 8.4% of GDP as a result of operational losses of CEB and CEB. "The increased public sector deficits were financed largely through borrowings from domestic sources," Central Bank said in its 2004 Annual Report.

The total net domestic borrowing of the Government increased to Rs. 117 billion (5.8% of GDP) compared to the original target of Rs. 65 billion (3.2% of GDP)," the Central Bank revealed. Similarly, the outstanding banking debt of public corporations rose by Rs. 5 billion to Rs. 41.2 billion in 2004. Consequently the central government’s debt and the public sector debt accounted to 105.5% and 107.5% of GDP respectively. These however were marginally lower compared with 2003 data.

It has been reported that CEB posted a hefty loss of Rs. 15 billion in 2004 while CPC saw its debt burden mount to Rs. 23 billion in 2004 from Rs. 15 billion in 2003.

The reasons for financial difficulties and operational losses of CEB and CPC include the failure in the automatic revision of prices of their products and services in tandem with costs. The Sharp rise in oil prices have placed an unprecedented burden on the two state institutions, which were among the five dragons, which the Finance Minister Dr. Sarath Amunugama identified last year.

Capital transfers to public corporations in 2004 had swelled to a record Rs. 19.3 billion as opposed to approved estimate of Rs. 9.3 billion. Transfers for current expenditure were Rs. 20.4 billion as against the approved estimate of Rs. 15.5 billion.

The Central Bank warned that the financial performance of CEB, CPC as well as Sri Lanka Railway has seriously worsened. "It could even threaten the macroeconomic stability given the strategic importance of the services they provide to the national economy," it added.

Noting that organized labour in the energy sector appears to be bent on a protest campaign against any type of reforms, the Central Bank also warned that the "weakening financial conditions of both CEB and CPC could drive them to virtual insolvency with an accumulation of debt obligations to the banking sector."

While price revisions would enable them to cut current losses, recapitalisation is needed to ensure long term solvency. The Central Bank also opined that the protest campaigns would have been motivated by a fear of losing employment, but delaying the needed reforms would hasten that feared eventuality, in addition to passing a burden to the taxpayers to rescue the two enterprises. The Bank said a frank dialogue among all stakeholders involved is a must to reach a consensus for reforms and mapping out a way forward program.

The CEB suffered from twin shocks of drought and high oil prices while CPC was a direct victim of the latter. "The unchanged prices led to the deterioration in the financial position of CEB requiring greater budgetary support. The delay in implementing new power projects, and the proposed reforms and the continuation of high system losses (over 17%) compounded the issues in the electricity sector," the Bank said.

Delayed and inadequate adjustment of fuel prices despite global spikes led to losses in the oil sector and together with the continuing subsidy had impacted the Balance of Payments (BOP). The country spent nearly US$ 372 million additional on oil imports in 2004. The full bill was US$ 1.2 billion.

The Central Bank said that the overall fiscal management and the maintenance of fiscal targets, became challenging in 2004, due to adverse external and domestic shocks that led to a slippage in revenue collection and an over run in expenditure.

In addition, the delays and lower than the expected foreign financing and privatisation proceeds aggravated the difficulty in managing public finances.

It welcomed the reversal in the declining trend in tax/GDP ratio in 2004 and attributed it to the impact of widening the tax base and improving the tax collection.

However, the annual tax collection recorded a shortfall of 0.9 per cent of GDP compared to the budgetary target of 14.8% in 2004. Similarly, the expenditure overrun was about 0.3% of GDP increasing the central government overall fiscal deficit from the target of 6.8% of GDP (which was subsequently changed to 7.3% with the Pre Election Budgetary Position Report in February 2004) to 8.2%.

Central Bank enlightens

Financial performance of CEB, CPC has seriously worsened with possible virtual insolvency in the offing
Threatening the macroeconomic stability
Price revisions would cut current losses
Recapitalisation is needed to ensure long term solvency
Protest campaigns motivated by a fear of losing employment, but delaying the needed reforms would hasten that feared eventuality
Additional burden looming on the taxpayers to rescue the two enterprises
Frank dialogue among all stakeholders involved is a must to reach a consensus for reforms and mapping out a way forward program.

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Providing Rs. 5000 for tsunami victims

ColomboPage: May 04, Colombo: Providing Rs. 5000 for tsunami victims in Sri Lanka depends on the availability of funds

Commissioner General of Essential Services Thilak Ranaviraja says families eligible for relief after the tsunami disaster will receive Rs. 5000 per month for six months, depending on the availability of funds.

Meeting displaced families at Balapitiya, Mr. Ranaviraja said although the government has decided to provide Rs. 5000 for a period of six months, the payment of that money will depend on what funds are available. However, those who have not received relief for the first two months can now collect it, he said.

Responding to questions raised by fishermen families, Mr. Ranaviraja said that if the houses along the coastal line were not destroyed by the tidal wave, families could continue to live in them. Families not wishing to move out could also stay in houses repaired after slight damage. There is no intention on the part of the government to take over land, he said. But the respective provincial secretaries will decide whether such houses are good for living.

Although the Commissioner General said the payment of Rs. 5000 depends on the availability of funds, at an meeting held at Sausiripaya, the Chairman for Rebuilding the Nation Mano Tittawella, speaking about relief for displaced families, said without condition that affected families would receive Rs. 5000 for six months.

He added that by six months, houses would be built to give to displaced families. According to Mr. Tittawella, the number of houses completely destroyed by the tsunami was around 41,393, and partly damaged houses numbered around 36,168.

The number of new houses built per year within the country is a mere 4000 and the task of building such a large number of new houses is therefore big. Hence, these houses will be built in three stages.

The fist step would be to move over 100,000 families living in 263 camps to immediate shelters. The second step is to move them to temporary houses. Then they will be moved to permanent houses, Mr. Tittawella explained.

The government has already found temporary houses for 15,000 families, and 4000 more houses are being constructed. He also said that over 200 benefactors have come forward to help in this effort. Some have signed MoUs with the state and together have commenced constructing over 2500 houses.

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Thursday, May 05, 2005

Education: Not privatisation but reforms needed

The Island: "04/05/2005 by Upali S. Jayasekera

It was reported in the press that opening of private universities has been proposed which, no doubt, is another move towards the privatisation policy and practice that would lead to the eventual elimination of the free education system of our country.

How would the proposal, if implemented, affect the future generations, especially the poor sections of the society which constitute the vast majority of the population? This question cannot be left entirely in the hands of the political elite.

There is, it has to be conceded, no perfect education system in our country. We have been experimenting but without any substantial improvement to meet the country’s needs for national consciousness, unity and development. The system therefore needs change and should continue to be changed as and when the need arises.

Any changes in the education system should however be introduced only if such changes suit the economic and social structure of our country. There has not been an effort made to study those aspects realistically. If any study was undertaken the proposals have not been made public. Hence the proposal is nothing more than an attempt to expand the privatisation process to the education system without the slightest concern for the country’s needs on a long term perspective.


Resources, capital, machines and labour are instruments of power which could be acquired and used in a practical and purposeful manner only through education. Education, as such, being part and parcel of economic and social development, schooling is an investment contributing to the wealth and well being of a nation. It is these reasons and the necessity to make opportunities for education available to all alike without discrimination on the basis of wealth, class or creed that the right of education has been included in the Universal Declaration of Human Rights.

The United Nations Convention against Discrimination in Education asserts the establishment and maintenance of separate educational systems or institutions for persons or groups of persons which are not of equivalent standards as discriminatory. This would mean that the maintenance of educational institutions which help the richer sections of the society to steal a march over the rest of the community or the maintenance of schools of unequal standards for the rich and the poor, is discriminatory.

Education therefore has to be based not only on equality of opportunity but also on equity, if we are to more towards social equity and economic development whilst adhering to ethics and standards as proclaimed by the United Nations. We should not permit international money lenders and their agents to undermine or override those lofty ideals taking advantage of our yearning for foreign loans and investment.


Our education system, even as it is, on the one hand, does not meet our national aspirations whilst on the other falls short of the UN Convention provisions.

There is no national system of education that suits our culture and society that meets our needs for economic development. Discrimination in education exists and persists.

The village school is without good and specialised teachers, and is often under-staffed. The facilities there cannot be compared with those where the affluent have access to. The denominational schools, though not open to other beliefs on the basis of merit, receive government grants over and above what is given to rural schools which procedure does not exist even in the western countries, which standards we aim at.

We have been led to treat the English speaking gentry as the educated elite. The swabhasha (Sinhala & Tamil) educated do not come within that parameter. Those from the so-called prestigious schools and others from the rest of the schools do not mix. This then is a division based on the discriminatory system of education that exists, which certainly does not help foster national unity and amity.

What need to be done therefore, is to change our education system to remove the voluntary and involuntary discrimination that exist between the rich and the poor, the rural children and the urban children and different religious groups. The tragedy is that, whilst no measures have been adopted to remedy the situation, discrimination has been permitted to become more and more deep rooted.


Our education policy followed since 1943 requires the schooling of a child in the mother tongue. This is the policy followed in other countries too - developed or developing, rich or poor. Accordingly the medium of education in our schools should compulsorily be Sinhala and Tamil. The use of any other language is contrary to this policy, illegal and anti-national.

However, the International schools, where Sri Lanka children study, have English as the medium of instruction. This then is a serious violation of the country’s education policy. Yet the functioning of these schools have been permitted and those institutions carry on with impunity.

Would any other country allow a privileged section of the children of that country to be educated in a foreign language especially when the elementary and secondary education is concerned? Will America permit Arabic or Sinhala to be the medium of schooling for her children or will Saudi Arabia permit English or Sinhala to be the medium of schooling in that country? No country will tolerate such flagrant violation of her education policy though we have allowed.

What are the Implications of such alienation of our education system?

The alien culture based education imparted in the International Schools, will to a larger extent, prevent our children attending those schools from acquiring social values and the ability to live with others, learning, customs peculiar and essential to our country. The children passing out from those schools will from a new social class with snobbish values, and will be inclined to consider themselves as a superior lot who have received the best education and even look down upon those educated in the swabasha or government schools. Can we permit such an education based class division which is not in the national interest? It goes further.

A news report published in a newspaper recently quoted a student attending an international school as having said. "Who wants to learn Sinhala? What can you do learning in that language ? Can you get a job with a good salary?" This then is the thinking —practical, no doubt.

The international Schools will certainly provide the opening for the children of the elitist class to secure more lucrative employment here and abroad leaving the lesser jobs for the not so fortunate children educated in the swabasha.

With the privatisation programme in full swing it will be English medium educated children of the affluent class who will reap the harvest. That in turn will pave the way for future class conflict and even an upsurge of violence.

It is a pity that there has been no public outcry against this dual system of education, which is in operation against the national policy. Perhaps the masses have still not had the time and the opportunity to analyse and understand the implications of the system, as the issues have not been placed before them in its correct perspective. And the educationists, surprisingly have continued to keep mum.


It could be argued that education in the English medium is nothing new to us and that it has helped the country. English was imposed on us during colonial times and with it came the spread of the western culture as well. English and westernization at the expense of our own language and culture were thought to be good at the time and this thinking and practice continued long after independence. This is because of the dominant part played by our political elite that sprang from the westernised English speaking fraternity, throughout.

English no doubt is a world language and it is in our own interest to get our children to learn the language. However there is no justification to permit the monied class to adopt English as the "mother" tongue in respect of their children for the purpose of economic expediency and social upliftment to the detriment of the vast majority of the population. The people will not endorse the replacement of Sinhala and Tamil with English as the medium of schooling in our country. If they do then that will be fine. Otherwise we have to teach English as the second language only and that should apply to the entire student population. Without exception English should not be the adopted mother tongue of a selected lot only, weather they be Sinhalese, Tamils or Muslims as long as they are Sri Lankans.

Private Universities

The private universities proposal, besides being a move to commence the process of privatizing education institutions, helps the stabilisation of International Schools as an integral part of the education system.

If a private university comes to be established it will be an English medium run fee-levying institution. For whose benefit will that be? Exclusively the rich, no doubt.

It is therefore a subtle move to introduce an education system that favours the rich. Perhaps the permanent establishment of an English educated ruling class obedient to westernised mannerism is the ultimate aim.

Education should help students to get at the good things in the world materially, in intelligence and in knowledge. That possibility should not be made available to the privileged only. It is, in that context, not fair or proper to allow the advantages of education to be reserved for the rich and the powerful only.

Our education system needs change. It is the responsibility of the educationists to take the initiative to propose necessary changes, with the advice and guidance of the economists, sociologists and the politicians.

The people should ever be vigilant, oppose and stop the imposition of any system that does not suit our culture or meet our national aspirations.

What is required is the strict implementation of a national education policy.

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Integrating Environment and Development in DecisionMaking

Development Gateway Environment and Development Agenda 21 Chapter 8 Integrating Environment ...: Agenda 21 is a comprehensive plan of action to be taken globally, nationally and locally by organizations of the United Nations System, Governments, and Major Groups in every area in which human impacts on the environment. Chapter 8 focuses on Integrating Environment and Development in Decision-Making.

Read Chapter 8

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First sitting of Tsunami Commission

Daily News: "03/05/2005

Opening address delivered by State Counsel Janak de Silva at the first public sitting of the Tsunami Commission:

"The 26th of December 2004 dawned as yet another day for all Sri Lankans. This was the holiday season where families took a break from their busy schedules. All were looking forward to a tranquil end to the hectic year that had been. Many families had come together to enjoy the holidays, which later turned out to their detriment as the events unfolded.

They were eager for the dawn of a new year overflowing with expectation and prosperity for them as well as the nation at large. However, at about 2.59 p.m. Hawaii Standard Time, a large earthquake occurred in the Indian ocean near Sumatra, Indonesia, which set in motion a series of events that was going to change the destiny of many Sri Lankans as well as foreigners, who were in Sri Lanka at that time, the nation as a whole and bring death and destruction of unimaginable magnitude.

The eastern, southern and parts of the western coast of Sri Lanka was hit by a giant tsunami. The destruction it wreaked upon human life and property is inconceivable. More than 30,000 died, more than 4,000 are still missing and nearly 500,000 persons were displaced. This was the worst tragedy that we as a nation had to countenance.

In the aftermath of this disaster various reports appeared in the media that some State institutions/agencies in Sri Lanka had received advanced warning relating to the earthquake and that there had been a failure to give advance warning of the impending disaster to members of the public.

If these reports are accurate, it is the greatest dereliction of duty in the annals of public administration in this country. On the other hand, if these reports are inaccurate, it is a gross abuse of the freedom of expression.

It is also said that similar natural disasters could occur again. President Chandrika Bandaranaike Kumaratunga, President of the Democratic Socialist Republic of Sri Lanka desirous of, amongst other things, ascertaining the truth of these reports in the public interest has, by exercising the powers vested in her in terms of Section 2 of the Commissions of Inquiry Act appointed Your Honours as the Commissioners to the Commission of Inquiry into matters relating to the conduct of relevant State institutions/agencies following the natural disaster which occurred on 26 December, 2004, and the measures that should be taken to improve early warning mechanism for natural disasters such as landslides, earthquakes, tsunami, floods, tornadoes, cyclones etc. and thereby to prevent or mitigate such devastation in the future. The mandate of the Commission has more fully been set out in the warrant which was read out by the Secretary to the Commission.

In my capacity as the State Counsel leading the team of State Counsel assisting the Commission, let me assure Your Honours that we shall leave no stone unturned in our efforts to ascertain the truth. If certain State institutions/agencies and officials have been negligent in the performance of their duties then, irrespective of the office they hold, it must be made public for we owe it to the people who lost their lives, their kith and kin and to the people who have suffered loss of property.

However, if in fact there has been no dereliction of duty that too must be made public. We owe it to the relevant State institutions/agencies, officials and their families who may have had to face the wrath of the public at large due to the aforesaid reports that appeared in the media.

In this endeavour, I intend to lead oral evidence of all relevant officials and experts as well as placing any relevant documentary evidence before the Commission. Attempts are being made to obtain relevant information from the Pacific Tsunami Warning Center since it is said that the warning of the impending disaster was given by the Center."

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Wednesday, May 04, 2005

Foreign aid – blessing or curse?

The Island: "30/04/2005 By R.M.B. Senanayake

During the post-war years Marshall Aid from USA funded the recovery of Europe. So when the developing countries which were then designated ‘less developed ‘ came to embark on development programmes they were advised by economists about two factors that would limit their development projects.

One was the ‘savings’ gap or the lack of sufficient domestic savings to fund all the investment that was required to build the infrastructure by way of roads, power plants, dams and irrigation works. It was argued that these countries had only about 15-17% of the GDP by way of savings and that 12% of the GDP was required to fund the public administration and another 5% to maintain and preserve the economic infrastructure of roads, bridges, power plants and the social infrastructure of hospitals and schools. So these countries have to engage in a deliberate mobilization of savings from already low per capita incomes by reducing consumption if they are to develop. The former colonial countries with some sense of guilt perhaps suggested the developed world should provide foreign aid to these countries to supplement their national savings.

Economists pointed out that these countries also lacked sufficient foreign exchange to import the required capital goods for development projects. So they talked about a foreign exchange gap as well. To tide over the savings gap and the foreign exchange gap they advocated foreign aid.

But Sri Lanka in the fifties did not lack foreign exchange since we exported tea, rubber and coconut products and earned considerable foreign exchange which could be used to finance the capital goods for investment. The savings gap could be met from government revenue. The plantations were taxed to provide the income of the government and fund the development programme. But by the end of the 1950s, the terms of trade - the balance between the import costs and export earnings - had turned adverse. The prices of our commodity exports were stagnant while the prices of imported industrial goods increased. So we actively sought and obtained foreign aid to meet the savings gap and the foreign exchange gap.

The amount of foreign aid increased dramatically after 1977. In 1977 it was Rs. 1,255 million while in 1978 it jumped to Rs. 3,953 million. Thereafter it increased with the Mahaweli Project. Foreign aid became an important item in the financing part of the budget.

Aid is not cost effective

The projects funded by foreign aid cost too much - much more than would have if funded locally. This is partly because a lot of foreign aid comes with conditions imposed by the donor countries. These countries insist that the goods and technical expertise required for the project should be obtained from them and these often cost much more than in the world market. Foreign contractors pad up foreign aided projects to pay kickbacks to ministers and bureaucrats. Some estimate that the cost of the project goes up by about 30% owing to such corruption.

International institutions like the World Bank and the Asian Development Bank as well as the International Monetary Fund give foreign loans. The advantage of foreign aid is that the terms of the loans are non-commercial from the donors’ point of view. The rate of interest is very low often about 2-3% and the terms of repayment are long, being over 15-20 years

Foreign Aid the source of grand corruption

Foreign aid can take several forms. It can be military aid, debt relief, and economic development assistance, and even disaster assistance money. We have benefited by way of a debt payment freeze this year. The US Government has granted a debt repayment freeze of $110 million according to a recent report attributed to the Minister of Finance. All these are with "strings attached". The donor institutions want human rights to be upheld. Greece which had passed an Anti-Conversion Law was required to suspend its implementation and later agree to rescind it before US aid could be given. The donors want an Interim Administration for the North & East because they can’t give aid directly to the banned LTTE. But they are keen to give aid to the areas under Tiger control. Foreign aid doesn’t include tariff preferences. The future of our garment industry depends on duty free and quota free access to the EU but these are conditional on observance of human rights, which continue to be violated all the time.

Foreign aid is also associated with "fraud, waste, and abuse." In fact it has been estimated that about 30% of aid proceeds are siphoned into the pockets of ministers and their cronies. Without foreign aid such grand corruption has no scope for our state is cash-strapped. There are many people who feel that foreign aid is the main cause for the culture of corruption that pervades our society. The fraud and failure of foreign aid is now so obvious that it has ended up in the pages of the prestigious American Economic Review. Economists Alberto Alesina and Beatrice Weder ask the simple question, "Do Corrupt Governments Receive Less Foreign Aid?" in the September 2002 issue, (quoted in the Ludwig Von Mises Institute website).

They found no evidence that nations and multinational institutions direct their foreign aid to less corrupt governments and away from more corrupt governments. In fact some others say the US Government prefers to give foreign aid to highly corrupt governments because they will do their bidding more willingly. They prefer highly corrupt democracies to dictatorships. The Ludwig Von Mises Institute has raised the question whether there is a correlation between democracy and high corruption in developing countries. The American Economic Review authors tentatively conclude that foreign aid over time increases government corruption in beneficiary nations. We qualify having had foreign aid for fifty years. They say "government-to-government "gifts" actually make government worse over time in terms of both government corruption and economic growth and creates what the authors call a "voracity effect" in recipient countries.

These authors’ brief review of the academic literature on foreign aid points out that:

* Foreign aid is used largely for "wasteful public corruption."

* Aid money is counterproductive for good public policies.

* Foreign aid money is given for "strategic" reasons, not real needs.

* Debt relief is not effective.

* Corruption has a negative impact on economic growth

If we consider the use to which foreign aid has been put by our governments most of these points are borne out. Aid money goes into projects, which do not necessarily promote good governance or economic growth.

Foreign aid doesn’t make help self-sustainable economic growth

Some economists argue that the big players in foreign aid, the International Monetary Fund and the World Bank, are more likely to bring about economic meltdown and social calamity than economic stability. Why do they say that? Because foreign aid came to be linked with what the IMF called ‘stabilization programs’ and structural adjustment programs.

Over the longer term foreign aid prevents the political leaders from taking the hard economic decisions required for self-sustainable growth. Instead they are tempted by foreign aid to indulge in an orgy of extravagant consumption for themselves and for the country. They don’t realize that there is a cost to their extravagance. The foreign aid enables money, which would otherwise have to be mobilized for investment to be used for the day-to-day spending of the government including expenditure on the war effort. If there were no foreign aid the political leaders would have been forced to economise on public expenditure and the country’s expenditure in foreign currency.

Under foreign aid the political establishment has grown and become too costly with MPs and ministers enjoying duty free limousines, and other perks all casting a heavy burden on the budget. They enjoy foreign funded jaunts, which bring no benefit to the country. Politicians with extravagant perks are not only at the centre but also at the provincial and pradeshiya level. Although the Provincial Councils are on paper vested with a variety of functions they have no fiscal autonomy. They don’t have powers of taxation to raise money to cover their expenditure budget. Instead they get grants from the central government snapping the connection between expenditure and taxation which alone exacts a sense of financial responsibility. Foreign Aid in short makes our political leaders blind to economic realities and make them irresponsible spendthrifts.

But the bills have to be paid even they fall due even after a long period. The massive foreign aid in the form of loans taken over the last twenty-five years are now falling due for repayment. This year’s budget provided for $500 foreign debt repayment which has been frozen by the creditors. If new foreign aid stops it is very likely that the government will have to default on foreign debts falling due for repayment next year and years thereafter. The carnival will then be over for the politicians.

Foreign aid has not stimulated a higher growth rate and has also adversely affected the creation of jobs. We have a large army of unemployed and need a labour intensive economic strategy to solve the unemployment problem. But foreign aid promotes capital-intensive growth. So bulldozers and heavy-duty tractors and power driven concrete mixers will be utilized instead of labour intensive methods for construction of buildings or dams or roads. Foreign aid is music to the ears of our political leaders. But the UPFA will soon realize that the music has stopped.

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Humanitarian Situation Report: 29 Apr - 3 May 2005

ReliefWeb - Document Preview: "Source: United Nations Office for the Coordination of Humanitarian Affairs (OCHA), Date: 03 May 2005, Humanitarian Situation Report - Sri Lanka: 29 Apr - 3 May 2005


The Special Rapporteur on freedom of religion or belief of the United Nations Commission on Human Rights, Asma Jahangir, is on a ten-day mission to Sri Lanka from 02 to 12 May. Her fact-finding mission focuses on religious concerns, including attacks on minorities and proposed laws regarding religious conversion. Her overall mandate consists of examining incidents and governmental actions in all parts of the world that might be inconsistent with the provisions of the UN Declaration on the Elimination of All Forms of Intolerance and Discrimination Based on Religion or Belief.

She has been invited by the Government of Sri Lanka to analyze the situation of freedom of religion or belief in Sri Lanka and will submit a report to the United Nations Commission on Human Rights. During her visit, she will hold meetings in Colombo with governmental officials, representatives of religious communities, political parties and members of the civil society. She will also travel to Kandy and the north and east of Sri Lanka. The Special Rapporteur is an independent expert appointed by the Commission on Human Rights for a limited duration and is acting in her individual capacity.

The number of tsunami-affected IDPs has remained relatively constant over the last few weeks. As of 27 April, the number of IDPs reportedly living in camps and hosted with friends and relatives stood at 515,365. The largest numbers of IDPs are recorded in Galle (121,934), Ampara (103,949) and Trincomalee (72,986).

The construction of transitional shelters is on-going in tsunami-affected districts. According to UNHCR, the total number of shelters constructed as of 21 April stands at 12,365. Another 7,145 are currently under construction.

Overview of Activities

The Food and Agriculture Organisation (FAO) has begun deliveries of US$ 1.74 million worth of seeds and fertiliser to tsunami-hit farmers in the South in time for Yala planting season. This has been made possible by a donation of funds from the Government of Greece through OCHA. FAO is currently distributing 66.72 tonnes of paddy seed in the districts of Galle, Matara and Hambantotoa. This will be followed by deliveries of 83 tonnes of basal fertiliser and 167 tonnes of urea. This is enough for a total of 1,668 beneficiaries in the south each with one acre of rice paddy.The total damage to the agricultural sector by the tsunami is estimated by the Sri Lankan government to be US$ 4.8 million.

UNICEF, in collaboration with the Health Promotion Working Group including the Alcohol and Drugs Information Centre (ADIC), is conducting a rapid assessment of problems related to increased alcohol and drug abuse in camps.

WFP has completed its preparation for the Mother and Child Nutrition (MCN) Programmes, aimed at pregnant and nursing mothers, and children under five, which is due to begin in the three districts of Galle, Matara, and Hambantota. The targeting of the beneficiaries and the packaging of coy soya blends is complete. The Programme will be implemented through the MoH. The distribution will be a one-month ration at one time. Leaflets explaining the preparation of the coy soya blend will also be distributed.

The Taskforce to Rebuild the Nation (TAFREN) has developed a framework to manage the programme of assistance towards re-establishing livelihoods for the tsunami-affected population. Called the Rapid Income Recovery Programme (RIRP), it is receiving technical assistance from the International Labour Organisation (ILO). RIRP is comprised of three components: cash transfers to beneficiaries; cash-for-work projects to provide short-term employment; and economic development programmes focusing on providing access to training, counselling, credits and business grants.

On 26 April, tsunami-affected people demonstrated in Vaharai, Batticaloa district complaining about the lack of progress in the construction of transitional shelters. A Shelter Task Force of government representatives and UN agencies and NGOs, meeting on 27 April, confirmed that little progress had in fact been made in the division so far. Only 180 out of a required 2,000 such transitional shelters have been constructed to date. Shelter agencies active in Vaharai have explained that this was mainly due to logistical obstacles and planning issues. Some of the specific difficulties mentioned were the slow arrival of construction material, poor road conditions, the low-height of the bridge at Kavenkerni making transport difficult and slow travel related to checkpoints and authorization procedures in the division.

Save the Children Sri Lanka has been training military personnel in Jaffna on child rights and protection issues. Two workshops were recently held for soldiers and officers by the Child Protection Protocol Officer. The training has been well received and military officials have requested that additional military staff receive such training. This is an important and ground breaking initiative to sensitize the military on child rights and protection.

In an update of UNICEF-supported WES activities as of April 2005, it reports that 1,150 toilets have been constructed; 352 water-points installed; 225 bathing facilities built, 9 gully bowsers provided; and 17 water bowsers. Over the coming months, UNICEF plans to construct an additional 4,088 temporary and permanent toilets, install another 5,906 water points, and build a further 1,587 bathing facilities.

The Transitional Accommodation Project (TAP) in Galle District reports as of 25 April that 2,665 shelters have been completed with 1,892 in progress (a total of 4,557) and a further 1,168 committed. The required need in total is 5,403. These figures include the provision for affected population with damaged homes within 100m and beyond 100m.

According to TAP statistics, out of a total of 11,725 required transitional shelters in Batticaloa district, 3,494 have been constructed so far. Some 80 per cent of the completed shelters are already occupied now. Families still need to be allocated to the remaining 20 per cent.

Main Challenges and Responses

UNDP has announced it is willing to support projects budgeted up to US$30,000 in all tsunami-affected districts in Sri Lanka that focus on these activities: restoration of minor and critical infrastructure, the recycling and removal of debris, water and sanitation facilities or waste management. All such projects need to have a cash-for-work component of at least 20 per cent of total cost, and UNDP will contract only with registered (legal entities) Not For Profit organizations and not with commercial organizations or international NGOs/Organizations.

UNICEF and World Vision have reported that people from Kattankudy and Kaluwanchikudy, Batticaloa district are returning from welfare centers to their places of origin. Consequently, the number of families in welfare centres continues to decrease. At the same time, Oxfam reports people moving out of official welfare centres in Vaharai and setting up their own camps in new locations in smaller groups of families, making it difficult for agencies to track them and address their needs.

Master plans have now been completed for 14 out of 25 schools UNICEF is constructing with 11 of the plans already approved by school principals, Zonal Directors of Education and Provincial Directors of Education. In a number of cases, delays have occurred in the allocation of appropriate lands or construction and also with the legal demarcation of sites by government surveyors which is required prior to construction. UNICEF is working with government counterparts at the central and district levels to ensure that these problems are resolved.

Some 1,000 people have received grants by now to start the reconstruction of their homes., according to the joint shelter, infrastructure and watsan taskforce in Batticaloa. Relief agencies are concerned that many recipients may not be able to fulfill the requirements to receive the second installment of their grant to complete construction, mainly because there are indications that some of them are using the grant for other purposes than home construction. There is also concern that reconstruction of homes will take longer than anticipated due to the shortage of skilled laborers. For example, while some 1,000 people have received a grant so far to build homes, there are only an estimated 600 skilled masons in Batticaloa district. "

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Economic Policy in Sri Lanka: Issues and Debates

A Festschrift in Honour of Gamini Corea, edited by Saman Kelegama; Published by Sage International Publications, India, 2004; 520 pages.

The Island: "30/04/2005 Review by Sunil Chandrasiri

Economic policy’ has been a key topic of debate among economists, social scientists, policy makers, administrators, investors, donors and others interested in growth and development. Over the past two decades, it has become highly controversial and provocative due to the involvement of donor agencies in economic policy issues of developing economies. A detailed analysis of the small open economy of Sri Lanka presents an interesting case study as its policy experience covers both controlled and open economy policy regimes over a period of five decades. Here are 23 well-trained economists and social scientists who have put together an in-depth and timely analysis about the change of policy regimes and its impact on socio-economic development of Sri Lanka. It’s a compendium of articles in honor of Gamini Corea in recognition of his contribution to Sri Lankan economic policy making and international policy making.

The volume is edited by Saman Kelegama, Executive Director of the Institute of Policy Studies and Co-Editor of South Asia Economic Journal, best known for his contribution on policy analysis in Sri Lanka. An innovative aspect of this volume is that it consists of six distinct sections: i) development strategy and ideology, ii) macroeconomic policy, iii) agriculture, industry and technology development, iv) employment and labour, v) institutional and governance issues, and vi) social welfare. The editorintroduction to the volume with a summary of the milestones of Gamini Corea’s career and to each of the parts and chapters put the individual studies into context to provide a comprehensive account of theory, issues and policy.

As far as we are aware, there exists at least five major compendiums of studies dealing with evolution of post-independence economic policy of Sri Lanka. This volume however, is a welcome contribution as it presents a more careful and detailed analysis of economic policy in Sri Lanka using a structured format. Its time coverage and scope are much more encompassing than any other study presently available. The volume contains quite thorough and detailed analysis of policy issues which are of vital importance to the on going policy debate in Sri Lanka.

Chapters covered in Part I deal with growth of manufactured exports and terms of trade, the influence of development ideology in macroeconomic policy reform process, the lessons of national planning, understanding policy reforms (1960-2000) and the importance of the public sector and includes Chapters 1-5. Part II deals with aspects related to fiscal policy, public debt, and exchange rate while Part III encompasses Chapters 9 to 11 focusing on agricultural development, industrial policy, and technology development. Part IV is concerned with employment and labour paying special attention to labour productivity, youth unemployment and migration. Part V examines issues related to economic liberalization and institutional reform, competition policy, privatization and regulation, and banking sector reforms. Part VI consists of four studies on colonial lineages of the welfare state, overview of the health sector, public investment in education, and poverty alleviation.

The volume consists of 22 self-contained chapters and the papers are well structured with sub-headings in the use of themes and fully documented with references to the literature in chosen areas. The economic policy issues discussed in many of the papers are based on sound economic theory and rigorous empirical work. Some of the papers are also rich in inter-country and inter-temporal comparisons. The constraints of space only allow a reviewer to discuss a small sample of papers in the volume without being able to do justice to all the paper writers.

Two papers on growth of manufacturing exports and exchange rates provide an interesting policy debate paying due attention to early contributions by Gamini Corea. More specifically, the Chapter on ‘Manufacturing Sector Exports’ makes an attempt to test the validity of Corea’s allegiance to the new export pessimism and the recent terms of trade debate. Similarly, Chapter on ‘Exchange Rates’ examines the behaviour of exchange rates with special reference to Corea’s contribution in setting up the multiple exchange rate system in the late 1960s. The paper on "the Influence of Development Ideology in Macroeconomic Policy Reform," provides an interesting account on the changing international opinion on ‘development debate’ and policy response to economic shocks in Sri Lanka. The Chapter on ‘Understanding Reforms (1960-2000)’ presents a comparative assessment of reforms and their outcomes. It also examines future perspectives for policy reform and points out that "there is indeed a real opportunity for a deal between Sri Lanka and the donor community at present whereby Sri Lanka commits itself to the policies needed for low inflation and prudent debt management while the donors guarantee aid support adequate to look after market failures comprehensively and sustain rapid growth."

The paper on importance of the Public Sector in Economic and Social Development’ examines yet another controversial issue - the role of the public sector in Sri Lanka - paying particular attention to the Report of the South Commission which included Corea. In its conclusions the author states that "the crux of the matter is that both the public and private sector are the engines of growth; one alone is inadequate. In a growing economy there is room for both to co-exist." The Chapter on `D4Fiscal Policy’ provides an important contribution to current policy debate on fiscal and taxation system in Sri Lanka paying special attention to declining trend of government revenue, relationship of taxation to savings, capital formation and investment, the elasticity buoyancy of the fiscal system, tax evasion, the black economy and tax amnesties and fiscal devolution. Similarly, the policy analysis covered by two papers on ‘Competition Policy’ and ‘Privatization and Regulation’ is relevant and important in the present context of economic policy debate in Sri Lanka.

The paper on ‘Youth Unemployment’ is an interesting exploration of the causal factors affecting unemployment and the author argues that "what Sri Lanka’s experience over the last five decades or so shows is that the most fundamental factor behind the phenomenon of heavy unemployment in the economy is inadequacy of accumulation and consequent sluggishness in economic growth." At the end of the analysis, the paper provides several policy insights including selective state interventions and appropriate institutional arrangements. The Chapter on ‘Poverty Alleviation’ looks at the poor in their micro-meso-macro framework and examines the complex linkage between the poor and the environment that controls their economic and social well-being. It is an interesting piece of work on pro-poor growth focusing on both theoretical and implementation issues. At the end the author rightly points out that "the agenda of the National Poverty Reduction Strategy, which is the implementation plan for the pro-poor growth concept, has to be decentralized down to the divisional level with time-bond targets. This has not happened as yet. Debates can go on and on in these two arenas."

Three papers dealing with agriculture, health and education raise some important issues and provide additional stimulus to on-going policy debate at sectoral level. For example, the paper on agriculture, discusses the controversies surrounding post-independence period. In its conclusions the author states that "it is interesting to note that current controversies in agricultural policies have been generated by policies recommended by, and often insisted upon by international institutions." The paper on health sector examines emerging demand and supply conditions and its implications for growth and expansion of the health sector. Similarly, the paper on education presents a comparative assessment of education sector and policy directions vital for future development.

It will be obvious to any reader that this volume makes contributions on a wide range of relevant and important aspects of Sri Lankan economic policy debate. The contributions offer multiple perspectives on evolution of economic policy in Sri Lanka. All in all, they are a refreshing collection of well researched papers that provide us with a much needed alternative views on current Sri Lankan policy debate.

The primary limitation of this book is the lack of cohesion typically found in a collection of articles written by a diverse set of researchers. The link between formal underlying theory and empirical support is also weak in some chapters. For example, Chapter 11 on ‘Technology Development: Key Issues in Productivity’ states nothing about productivity. It has also failed to capture some of the key arguments relating to R&D, productivity and competitiveness of Sri Lanka. Similarly, the paper on ‘the Lessons of National Planning’ is rather descriptive and the coverage is of less relevance to on-going economic policy debate in Sri Lanka. Reader should not, therefore, expect this volume to provide conclusive evidence on some of the issues currently debated among policy circles. Instead what they will find in some chapters is that the authors have identified and highlighted a set of interesting issues and debates. Another major limitation of this volume centres on the selection of topics. Indeed, the volume has failed to cover some of the key sectors seriously threatening the socio-economic development of Sri Lanka i.e. energy and transport.

Despite these observations, most of the individual chapters are lucid and informative, based on careful revision of literature and an assessment of competing views. The balance between reviews and original work is about right for a mainly policy-oriented document. The real value of this volume is that it provides a good coverage of policy regimes over the past five decades with a clear focus on its socio-economic impact and future directions. This volume covers much ground, and the clear and careful presentation will make it useful to policy makers, academics, researchers and students and a rich source for further research.

(Dr. Sunil Chandrasiri is a Senior Lecturer at the Department of Economics, University of Colombo)

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Tuesday, May 03, 2005

Treaty Urged to Protect Human Right to Water

DEVELOPMENT: Treaty Urged to Protect Human Right to Water: "Haider Rizvi

UNITED NATIONS, Apr 22 (IPS) - Alarmed by corporate moves to treat water as just another market commodity, leading civil society groups are urging the international community to adopt a new universal treaty to protect the right to water.

The ratification of such a convention by the U.N. member states would give a legal instrument to all people to defend their right to clean water and sanitation,” former Soviet president Mikhail Gorbachev, who currently leads Green Cross, an international environmental group, told reporters this week. Green Cross and other non-governmental organisations (NGOs), which actively took part in the just-concluded sessions of the Commission on Sustainable Development related to water and sanitation policies, believe the new treaty would be helpful in drawing distinctions between the different aspects of water use and the related rights and obligations at the local, national and international level. The former Soviet leader called on the U.N. member nations to ”seriously consider” the possibility of supporting the idea of a Convention on the Right to Water. ”Should the General Assembly support this initiative this September, this would be highly appreciated by the international community and by millions of millions of people in need of water as a concrete step toward the resolution of the water crisis,” he said. ”Time is a luxury not enjoyed by those whose lives are cut cruelly short due to a lack of clean water, and the time is also running out for the Millennium Development Goals (MDGs),” he added. ”But we can still honour our commitments. Failure is not an option on the table today, and we will not be given the luxury of a second chance.” According to the U.N., over one billion people lack access to clean water and over two billion have no access to sanitation, the primary cause of diseases like cholera that take the lives of more than 6,000 children in poor countries every day. The right to water is mentioned in a number of international legal documents, such as the Action Plan adopted by the U.N. Water Conference in 1977, the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), the Convention on the Rights of the Child, and the Dublin Statement on Water and Sustainable Development. In November 2002, the U.N. Committee on Economic, Social and Cultural Rights also affirmed that access to adequate amounts of clean water for personal and household use is a ”fundamental human right of all people.” However, there is no international instrument that guarantees to every person the right to affordable water, obliges national authorities to respect this right, and provides a model and mechanism for its implementation. Although less than 10 percent of the world's water resources are currently controlled by the private sector, critics of privatisation warn that in the absence of a binding international treaty, in the next 10 years private companies will control more than 70 percent of water resources in North America and Europe alone. Addressing the Asian-African Summit in Jakarta Friday, U.N. Secretary-General Kofi Annan said he had called on every developed country to commit to contribute 0.7 percent of their gross national income to reach the MDGs, which seek to provide clean drinking water to 500 million people in the next 10 years. The MDGs include a 50 percent reduction in poverty and hunger; universal primary education; reduction of child mortality by two-thirds; cutbacks in maternal mortality by three-quarters; the promotion of gender equality; and the reversal of the spread of HIV/AIDS, malaria and other diseases, all by 2015. ”The time has come for action -- concrete, measurable steps to a quantum leap in resources for development,” he said. ”The human family cannot enjoy development without security, and we will not enjoy security without development, and we cannot enjoy either without respect for human rights.” Sharing Annan's views, Gorbachev said the slow progress in achieving the MDGs was the result of ”the paralysis of political will,” while urging both donor and developing nations to double their spending from 14 billion dollars to 30 billion dollars a year to meet the water and sanitation targets. ”This is not about charity, no matter what form it takes,” he said. ”This is about equality of all people in satisfying their basic needs and about the right of every person to access clean drinking water and sanitation.” On Friday, delegates from around the world who attended the Commission on Sustainable Development, which lasted for two weeks, were still busy drafting a final statement on the policy options related to water and sanitation policies. The first draft circulated to the media, however, pointed out that ”a substantial increase” of resources would be required if developing nations, especially the least developed countries, ”are to achieve the internationally agreed development goals and targets.” (END/2005)
Commission on Sustainable Development
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Sethusamudaram in a time of Tsunami

Dealing with the Tsunami: : "by Lareef Zubair,
I had thought that the Tsunami shall put an end to the Sethusamudram project which is being proposed to cut a channel for ships to travel from the Arabian Sea to the Bay of Bengal without going around Sri Lanka. The narrow channel, the Palk Straits, is of recent origin in geological terms and rather shallow. At some points its only a few meters across particularly at Adams bridge.Although there are extraordinary pressure gradients across this channel due to the South-West monsoon during the Northern Hemisphere Summer and the North-East monsoon during the North Hemisphere Winter, the currents across the Palk Straits are negligible although there is an oceanographic jet of high speeds just South of Sri Lanka that makes a spectacular seasonal reversal every year. It is the barrier between India and Sri Lanka due to Adams Bridge that ensures a relative tranquility providing a delicate niche ecosystem that was sensitive enough to produce oysters and the endangered duggons now documented in the Gulf of Mannar marine park. If indeed, you cut through the canal, one may not quite know what the impact shall be as, there could be a feedback loop of a small cut leading to erosion, which increasing the channel depth and section and that leads to greater erosion. I had raised all this in 1997 and it is rather foolhardy to undertake this project where there are so many vulnerable people both in Tamil Nadu and in Sri Lanka. If anything became clear during the Tsunami, it is how careless and incapable officialdom in both countries are regarding reducing the risk of the vulnerable and even taking care of those who suffer from their dereliction of duty.The matter was then being pushed by the Indian Defense Minister George Fernandes with thoughts of dealing with the regional nuclear threat in mind. Lately, the mantle to push through the project has been taken up by the DMK, the ruling party in Tamil Nadu and there are questions as to whether a fair environmental impact assessment can be undertaken there given the promise of the Ministers of Shipping and Environment to pursue a favourable outcome.It is in this context that the Tuticorin port authority put out a EIA report in outline. Many have raised questions. There are just so many assumptions in that report. In one place, it says that no leakage or accidents of ships will be permitted in the channel. How, this is possible when rebels and smugglers cross the Straits at will was not addressed. It is only in the last year, that the new government in Sri Lanka even considered taking up the issue. Since that time, a panel of scientists led by the National Acquatic Research Agency has put together a Environmental Impact scoping report. In reality there is no data. Yet, its unfortunate that these scientists have not publicized their findings.As important, is the principle, increasingly recognized in International treaties - which is the Precautionary Principle. This merely states that one should not undertake actions that can lead to extreme environmental and health impacts if one is not sure of the possible scenarios. Yet, those in favour of this project in India and some in Sri Lanka. They argued that India's experts have made their pronoucements and we shoudl all get out of the way of "development".The oceanographical possibilities was reduced to a caricature exercise of a model canal through the straits. But nature is not so simple. And if there was any thing needed to prove it and wake people up , it was the giant earthquake and Tsunami which our respected scientists completely missed forewarnign of the risks of. These and other risks have not gone. While the scientists, policy makers and the contractors are derelict, its the vulnerable who pay the price. Now, it is hard to countenance the fact that the state government of India is going to increase the vulnerability of its coastal population, leave risks regarding fisheries, and indeed the marine ecosystem based on so many unknowns. "

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The Upcoming Rainy Season

Dealing with the Tsunami:: "by Lareef Zubair

Four months after the Tsunami most of the survivors of the Tsunami remain in temporary shelter either in tents or being accommodated by family and friends, despite the massive fundraising by funds that have been raised by the governmental and non-governmental organizations. They remain vulnerable to a variety of environmental stresses as the seasons marches on.
On the whole, the January to March 2005 period has been just slightly wetter than normal in most parts of the island. This is a dry period in Sri Lanka and it only now that April ends that heavy Yala rainfall is expected. Thus the shelters, the drainage, the septic systems and drainage systems shall be exposed to heavy rainfall and the conditions are right for mosquito breeding.
The seasonality of malaria transmission is such that there is risk in the affected regions unless sufficient care is taken. The roofing in temporary and other shelters shall be exposed to rain. If the tsunami related debris has not been properly disposed and the munipal waste disposal is improper, then rain can leach contaminants into the water supply. If the drainage systems blocked up the tsunami debris and damage has not been cleared this is the time when water logging can lead to myriad other problems. In these and myriad other ways, the rainfall can produce impacts that can impair people who are particularly vulnerable and proper attention is needed as Yala approaches. See Figures "

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Monday, May 02, 2005

Growth dives to 5.4% in ‘04 on internal, external shocks

Central Bank points to economy’s resilience but says a high 6-8% growth needed to reduce poverty, more jobs; lists downside risks for 2005

Daily Mirror: Financial Times: "30/04/2005

The economic growth in 2004 dipped to 5.4% last year from 6.6% in 2003 due to internal and external shocks and Central Bank yesterday urged for higher rates of 6-8% if the country were to reduce poverty and generate jobs to desired levels.

"The growth of over 5% is a reflection of the economy's resilience to the many adverse shocks the country had to face during the year - the surge in international oil prices, a severe drought in the early part and the floods later on in the year and finally, the tsunami disaster," Central Bank said in its 2004 Annual Report released yesterday.

"The growth was largely supported by the strong performance in exports, consumption and investment and the resurgence of economic activities benefiting from the continuation of the ceasefire," it said.

Despite lower GDP growth a noteworthy achievement in 2004 was that the country's per capita GDP exceeded US dollars 1,000 for the first time. "With this achievement, it is expected that Sri Lanka would make further progress towards becoming an upper middle income country," the Bank said. Another development was investment to GDP ratio improving to 25% from 22.1% in 2003. This was entirely due to increased private investment. However Central Bank said that this figure should rise to atleast 30% in the near future as a platform for higher GDP growth.

Domestic savings and national savings remained unchanged at 15.9% of GDP and 21.6% of GDP, respectively, in 2004. This led to a widening of the savings-investment gap, which was financed through the increased utilisation of foreign savings and official reserves, as reflected by the widened current account deficit in the balance of payments (BOP).

"As these levels of savings and investment are not adequate to raise growth and the standards of living substantially, a concerted effort must be made to raise savings and investment," the Bank said adding that higher investment needs to be channelled to improve essential infrastructure, which would be most productive in promoting a higher and regionally balanced growth. Western Province accounted for 49% of the GDP.

Healthy developments in the Services and Industry sectors contributed to economic growth in 2004 although the Agriculture sector faced a setback due to adverse weather conditions. The Services sector, which grew by 7.6% in 2004, as reflected by the growth of wholesale and retail trade, hotels and restaurants, transport and communication, and financial, real estate and business services sub-sectors, contributed 77% to the overall growth. Strong external and domestic demand helped the Industry sector to grow by 5.2%, contributing 25.7% to the overall growth. The Agriculture sector recorded a negative growth of 0.7% in 2004.
Looking ahead, sustainable growth in agriculture requires increased contributions from both plantation and non-plantation sectors. The plantation sector needs further improvements in productivity and to move towards crop diversification. In the non-plantation small-holder sector, while productivity improvements need to be further continued, access to finance and land utilisation issues also have to be addressed. Furthermore, guidance should be provided to farmers through sustainable extension services, for better water and input management and improved new crop varieties. The key to raising agricultural productivity lies in the introduction of high yielding varieties, the use of new technology such as drip irrigation and poly tunnels, the adoption of research and technological developments, the use of advanced crop practices through international partnerships and the more efficient use of inputs. Developments in irrigation infrastructure should be accelerated to support the Agriculture sector, the Bank said whilst welcoming the recent resurgence in developing and rehabilitating tanks and waterways. The Bank also called for reduction of harvest losses in agriculture which is estimated to be around 30-35% of production.

Inflation, which was low throughout 2003, began to rise in 2004 with the drought and the higher fuel prices leading to high cost-push inflation, while the increase in money supply and fiscal expansion, led to demand-pull inflation.

Monetary policy during 2004 aimed at containing inflationary pressures, while supporting economic growth. However, monetary management became more challenging in 2004 with rising inflation and increasing domestic credit demand. The Central Bank conducted its monetary policy in an independently floating exchange rate regime within a framework of targeting monetary aggregates.

The monetary policy was implemented through active open market operations, which includes, as its main component, the interest rate corridor formed by the Repurchase (Repo) rate and the Reverse Repurchase (Reverse Repo) rate and permitting the market to determine the interest rates within this corridor. This effort was supplemented by maintaining the Statutory Reserve Ratio (SRR) unchanged at 10%. In the context of continuous sales of foreign exchange by the Central Bank to dampen excessive exchange rate volatility, the Central Bank injected funds through the purchase of Treasury bills in the primary market, to prevent a liquidity shortage in the money market and any undue fluctuations in interest rates.

The difficult economic conditions that prevailed in 2004 required proper timing and sequencing of monetary policy tightening. With further acceleration of inflation and monetary growth by mid-2004, as the first step, the Central Bank began to conduct open market operations aggressively from June 2004 and absorbed almost the entirety of the liquidity surplus, inducing an upward adjustment in the short-term cost of funds, so as to contain the growth in monetary aggregates. Second, the Bank's Repo and Reverse Repo rates were raised by 50 basis points in November 2004. Meanwhile, to contain non-essential consumption such as the importation of motor vehicles, a 100% margin deposit requirement was enforced on letters of credit opened for the importation of motor vehicles for private use. The Central Bank expects to contain monetary expansion at 15% in 2005 to rein in inflationary pressures in the economy.

On the external front, both trade and current accounts in the BOP recorded deficits. A high import growth of 20%, largely due to high international fuel prices, surpassed the 12% growth in exports and the 11% increase in worker remittances. The surpluses in the capital and financial accounts were not adequate to cover the current account deficit due to lower than expected programme loans from the World Bank and the Asian Development Bank (ADB). Hence, the overall BOP registered a deficit of US dollars 205 million and the effective exchange rate (based on the 24 currency basket) depreciated by 11% and 1.1%, in nominal and real terms, respectively.

International oil prices increased sharply in 2004, raising Sri Lanka's average import price of crude oil to US dollars 37 per barrel from US dollars 29 per barrel in 2003, resulting an increase in the oil bill by US dollars 372 million. This contributed to the worsening of the BOP and the fiscal situation with a substantial increase in subsidy payments to oil distributors, and the continuation of inefficient use of fuel since domestic prices have not been fully adjusted to reflect increases in international prices. The increased subsidy expenditure could have been utilised for raising the level of investment substantially, for instance, meeting the entire cost of a large investment project such as the Southern Expressway.

The conduct of fiscal policy in 2004 was a challenge in the face of internal and external shocks that were threatening to slow down the economy. The government's overall fiscal deficit increased to 8.2% of GDP compared with 8.0% in 2003. The concomitant public sector deficit, which is the total of government deficit and the operational losses of public sector corporations, was 8.4% of GDP in 2004, compared with 7.8% in 2003, mainly due to the operational losses of the Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB). In this context, the government revised fuel prices upwards in 2004. Nevertheless, the revisions were not adequate and the spillover effects of increases in international prices continued to be a heavy burden on the public sector. The increased public sector deficit in 2004 was financed largely through borrowings from domestic sources due to a shortfall in foreign financing. However, government debt and public sector debt as percentages of GDP decreased marginally to 105.5% and 107.5%, respectively, in 2004 from 105.8% and 107.9%, respectively, in 2003, due to a higher increase in nominal GDP compared to the increase in debt stocks in 2004.

The government that took office after the general election in April, set new directions to the growth and poverty alleviation programmes with a greater focus on a regionally balanced growth as well as rural and small and medium sector development.

The fiscal consolidation process continued in 2004 with the government introducing a series of measures to improve the revenue performance and rationalise expenditure. These included the strengthening of the tax administration, the introduction of the Economic Service Charge (ESC), the revision of administered prices, the rationalisation of recurrent expenditure, the strengthening of public enterprises by setting up the Strategic Enterprises Management Agency (SEMA), and the establishment of the Administrative Reforms Committee (ARC) and the National Council for Administration (NCA). In addition, transparency in government procurement was strengthened by adhering to the reporting requirements of the Fiscal Management (Responsibility) Act (FMRA) and setting up of the National Procurement Agency (NPA).

The government's policy statement and the medium term macroeconomic framework announced with the Budget 2005 set out broad strategies to achieve macroeconomic stability and a regionally balanced economic growth rate of 6-8% over the medium-term. The policy envisaged prominent roles for both the public and private sectors, and pro-poor, pro-growth strategies, while continuing market based economic policies pursued by successive governments over the past two and a half decades.

The medium term macroeconomic framework presented with the Budget 2005 has been revised by taking into account the impact of relief, rehabilitation and reconstruction associated with the tsunami disaster. Economic growth would suffer in 2005 albeit marginally, mainly due to the impact on the fisheries and tourism sectors. Increased rebuilding activities would compensate to some extent for the loss of economic activities in fisheries and tourism. The growth is expected to accelerate to over 6% from 2006 onwards spreading across all sectors and geographic regions with the renewed emphasis on regional development as well as the nation rebuilding programme by the government.

Several downside risks remain in achieving the immediate as well as the medium term targets. First, the risk of a further escalation of international oil prices still remains. Any further increase in oil prices could exert a heavy burden on the economy and the people. Second, the global economy has already shown signs of a slowing down in 2005. This may threaten Sri Lanka's export performance. Third, Sri Lanka's major export industry, the textile and garments, is faced with increased competition in the world market due to the phasing out of the Multi Fibre Arrangement (MFA) in 2005. Fourth, any delay in the disbursement of pledged foreign assistance may delay the urgent rehabilitation and reconstruction work, affecting the overall economic performance and the realisation of the expected fiscal consolidation in the medium term. Thus, the country needs to be prepared to face any of these adversities.

The Bank's Annual Report contains a detailed analysis of Sri Lanka's economic performance in 2004 and the medium term prospects, highlights economic issues and policies, outlines the activities of the Central Bank and also contains major financial legislation.

As required under Section 35 of the Monetary Law Act, the Monetary Board of the Central Bank submitted its fifty fifth Annual Report, in respect of the year 2004, to Finance Minister Dr. Sarath Amunugama yesterday.

Other articles on the Central Bank's Annual Report for 2004
Daily News: "30/04/2005 High growth reflects economic resilience
The Island: "30/04/2005 Sri Lanka economy resilient, GDP grows 5.4% despite adverse impacts in 2004

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