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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, April 22, 2006

Sri Lanka banks on poorest women

BBC: 06/04/2006" By Samanthi Dissanayake

Women's banks are flourishing in Sri Lanka but there are questions about whether they really make a difference to poverty.

There is barely space to move in Philomena Aranasingham's front room. She lives in the Kirullapone slums in the heart of Colombo, moments away from a still waterway with sewage floating by.

Her room is swamped with red velvet curtains and silk shirts. She runs a lucrative tailoring business from here.

"Five years ago I had nothing. Now we have comfort at home, a phone and our children can go to school without shame."

The drapes are a major commission from the Sri Lankan army.

Philomena was the first recipient of loans to women from the Grameen bank, which has operated in Sri Lanka for almost six years.

From a blast to a bank

When a bomb ripped through the Central Bank of Colombo in 1996, Lalith Kotelawela, one of the wealthiest men in Sri Lanka and head of a giant hotel and banking conglomerate, was among the injured.

It was while recuperating in hospital that he was inspired by Bangladesh economist Muhammad Yunus' book about micro-credit schemes aimed at the very poorest women in his country.

He decided to import the 'Grameen' concept to his own country.

The bank has now lent to 78,000 women on the breadline throughout Sri Lanka, exactly the kind of women who wouldn't normally qualify for loans from banks.

Two doors down from Philomena's home, Laxmi Priya, another beneficiary of the Grameen bank, crouches over a wok of boiling oil frying snacks to sell on the street.

"Before, we only had a small wok. Now we have gas cooker, a big pan and money to employ one person. Life is a little easier for us these days."

Laxmi and her husband Nadaraj live, eat, fry and sleep in one room.

Barefoot banking

Women's banks are nothing new to Sri Lanka. Women have long pooled savings to provide loans for each other using a kitty system.

In the late 1980s, grassroots women's groups in villages throughout the impoverished Hambantota province set up informal banks, where village girls studying A-levels handled all transactions.

These groups became the Janashakthi Bank Society, where to join a woman must have an income below the official poverty line.

Grameen also lends to those least able to repay loans and at minimal interest. Transactions take place in the heart of the community in temples, churches and village halls.

It represents the involvement of a major commercial player with serious networks, money and banking experience. The bank has a 100% repayment rate according to Victor Ratnayake, its deputy chairman. He says this is because they lend only to women.

"Women have the stability of the family at heart. Men would use the money for drinking and entertainment. Our country needs to invest in women. This is the way for us to move forward."

The loan structure is probably the key to its repayment rate. Women come up with ideas for their own businesses and form small groups to qualify for a loan. If one group member defaults, the others are held responsible.

Low income traps

But some argue that a vibrant women's banking sector has not delivered enough change.

"Women are just a little bit better off than they were. Debt is less of a problem but income levels have not risen substantially," says Professor Swarna Jayaweera of the Centre for Women's Research in Colombo.

"These schemes work well to lift women out of absolute poverty as they do in India and Bangladesh." She argues that Sri Lanka needs more investment in management and marketing expertise - not small loans to enable women to keep their tiny cottage enterprises just ticking over.

Laxmi and Nadaraj are a case in point. The lease to their all-purpose cell has run out. They need to find another place, preferably with a toilet, as Laxmi is heavily pregnant.

"Without property of our own whatever we earn from our business goes on rent." They survive but see no way of escaping a low-income cycle.

Marital business

Lending only to women isn't necessarily the recipe for harmonious relations between man and wife.

Victor Ratnayake has been chased down the street by a knife-wielding husband, irate that food had not been appearing on the table ever since his wife was diverted into self-employment. The husband eventually came round.

Mr Ratnayake maintains that teething problems disappear when the overall benefit of the loans became clear.

But this assertion is met with scepticism by the Rural Women's Organisation Network, a small group operating on the southern coast.

"Husbands do allow the women to get self-employed, but whatever income they generate goes straight into their pockets," says Soma Hettige, secretary of RWON.

She helps women battered by husbands trying to extract money for gambling. In her experience, wifely earnings do not magically summon up reason if dearly-held patriarchal structures are undermined.

After the tsunami

The area RWON works in was devastated by the tsunami.

"I had a small fruit stall. I don't even have a home now," says Somavati on Weligama beach.

Yet the old financial self-help groups still exist, lingering on the beach by the ruins that were once homes. They have been transformed into social networks in the aftermath of the disaster: "We're all friends. They can build in my garden," says Jayavati a group leader.

These women have plans to start again their spice shops and food stalls. They will use loans for women to help them on their way.

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Friday, April 21, 2006

Government officials obstruct Taiwanese assistance to the tsunami victims in Sri Lanka

Asian Tribunal: 06/04/2006" Sunil C. Perera - Reporting from Hambantota, Sri Lanka

A number of philanthropists from Taiwan who have shown their interest to assist local tsunami victims, providing shelters and improve their lifestyles are worried due to the inactive government officials in the Hambantota area, who have also disobeyed their instructions given by the President of Sri Lanka.

Rev.Dr. Bodagama Chandima thero, Chief Sanganayaka of Taiwan , who led the entire relief assistance project is also worried at the officials activities and has now flown back to Taiwan.

Rev. Chandima who constructed 300 houses to the tsunami victims in Ambalantota area received a number of threats from government officials.

"They asked the Buddhist monk to work under their plans," said Most Rev. Pallegama Sri Jinaratna thero, chief incumbent of Haathagala Rajamaha Viharaya, Ambalanthota.

Rev.Chandima thero, has constructed houses, basic infrastructure, play ground, public library, Children’s park and Day care centre at the Taiwan Samadhigama , off 1.5.kilomtres from Nonagama.

A committee comprised of District Secretary, Hambantota and few government and non-government officials conducted interviews to select suitable families to allocate these houses. After their selections, the government officials refused to allocate pipe borne water and electricity to these house owners, he said.

"If there are any eligible house recipients, the government officials can mediate with us to remove them. But they never follow acceptable procedures, but only follow the law of jungle," he said.

"President of Sri Lanka Mahinda Rajapaksha has ordered the officials to assist Rev. Chandima’s effort. But they have boldly flouted the President's ruling," Rev.Jinaratna said.

According to Rev.Jinaratna , there were plans to construct 1000 houses at Taiwan-Samadhigama in Nonagama .After the officials' red tapes Rev. Chandima has returned to Taiwan.

"We made several appeals to the responsible government officials, area politicians and the President of Sri Lanka. The President has ordered the District Secretary of Hambantota to solve this matter within three weeks."

However, District Secretary of Hambantota couldn't solve our problem after a six-month period, the Rev. said.

The philanthropists have spent over US$ 2.5 million to construct 300 houses and provide infrastructure .The donors also allocated their funds to supply household utensils and furnitures, he said.

At present house recipients at the Taiwan Samadigama face severe water problem and lack of electricity. They said that they have to waste their night time to collect water.

"Some house owners have pipe borne water facility. But we have to wait long hours to collect water from these taps," said S.Seetin, a resident of Samadhigama.

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Thursday, April 20, 2006

Report: Mangroves failed to protect coastal communities in 2004 tsunami

The Lanka Academic: 03/04/2006"

Associated Press, Mon April 3, 2006 06:00 EDT . MICHAEL CASEY - AP Environmental Writer - The study, published in April's edition of the journal Estuarine and Coastal Shelf Science, also warned that governments in India and Sri Lanka - are offering a false sense of security and displacing scores of residents unnecessarily by proposing green belts and buffer zones in areas hard hit by the massive waves. The World Conservation Union, also known as IUCN, and other nongovernmental organizations earlier reported that mangroves saved lives in Sri Lanka - and India a finding they said could motivate hard-hit communities across Asia to consider replanting mangroves.
A quarter of mangroves have been destroyed in tsunami-impacted countries since the 1980s due to development and the rapid growth of shrimp and fish farms.

But Baird, of James Cook University in Queensland, Australia, and his co-authors argued that governments would be better off putting their resources into an early warning system and evacuation plans. They also called for many coastal communities to be moved to higher ground.

Based on their studies of tsunami-hit villages in India, the authors found the ones that fared better were located at higher elevations and that the presence of mangroves or other vegetation was rarely a factor.

``Our reanalysis revealed that the distance of a village from the coast and the height of the village above sea level explained 87 percent of the variation in mortality among villages,'' the statement quoted Alex Kerr as saying. Kerr, of the University of Guam, is one of the study's co-authors.

``The apparent link between vegetation area and mortality was actually due to the fact that more vegetation grows at higher elevations above sea-level and the greater the distance from the sea, the greater the area of vegetation,'' he said.

IUCN found that only 2 people died in the Sri Lankan village of Kapuhenwala which was surrounded by 200 hectares (500 acres) of dense mangroves and scrub forest. In contrast, nearly 6,000 people died in the nearby village of Wanduruppa, where mangrove forests had largely been cut down before the disaster, it said.

A separate study released in October by researchers led by Finn Danielsen of the Nordic Agency for Development and Ecology in Copenhagen, Denmark, reached similar conclusions.

The IUCN has started restoring hundreds of hectares (acres) of mangroves in Sri Lanka - and southern Thailand which were destroyed by the 2004 tsunami. It also launched Mangroves for the Future, a US$45 million (euro38 million) program that aims to build natural barriers of mangroves in twelve countries in Asia and Africa.

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Wednesday, April 19, 2006

Words, Deeds and Sacrificial Lambs! : Another commission bites the dust!

The Island: 03/04/2006" by a Special Correspondent

The President’s recent assurance that honest public servants will be supported and defended in their decisions is very welcome. Notwithstanding such assurances and guarantees by successive governments and of course, his predecessors, they have been observed in variably in the breach. President Rajapaksa’s words were nevertheless reassuring considering his Mahinda Chinthanaya taking a flying start. Public servants were ready to proclaim — "Indeed a Daniel Come to Judgement!" The path to heaven is paved with good intentions they say, and no one could possibly doubt the good intentions of the President to rid the public service of corruption and to re-create an honest public service which can take fearless decisions with the ingredients of fair play and justice. Yet, how far he can proceed in a climate of political instability inherent with proportional representation is a serious question that naturally arises in the discerning mind. Political considerations apart, trade union pressures which promote self-interest over national interests are a major factor to be reckoned with.

Cracks have already begun to appear and independent decisions taken with due regard and examination, checks and balances, vis-a-vis the national economy and survival of public servants generally, have been severely attacked irresponsibly by trade union leaders not on grounds of consent reasoning to convince their membership but on totally irreconcilable and irrelevant demands to oust the institutional set up that examined the subject matter and made considered recommendations.

National Council for Administration (NCA)

The National Council for Administration was one of four institutions set up by the government of President Chandrika Bandaranaike Kumaratunge in August 2004 covering four broad categories which are relevant to the economy, the others being National Council for Economic Development (NCED), Strategic Enterprise Management Agency (SEMA) and National Procurement Agency (NPA). That this was a good move on her part has to be accepted.

Hence, the NCA had many responsibilities included in its mandate including the establishment of a permanent body for developing policies and programmes covering public administration. It was also expected to re-visit the salary structure recommended by the Salaries Commission of 2000 taking into consideration the ad hoc increases of salaries granted to specific sectors after 1997. In the one and a half years of its existence, the Board of Management of the NCA had completed many of its tasks, including a Draft Bill for the establishment of a permanent body, "National Council for Administration" and presented to government the necessary data and recommendations for the Budget Speech presented by the then Minister of Finance Sarath Amunugama on 8th November 2005. The highlights of this Budget Speech pertaining to salaries are contained in item 79 of the Speech, namely:

(a) minimum salary — Rs. 11,630/- per month (the new structure incorporate interim allowances and corrected prevailing anomalies. It provided more than the salary increase recommended in Budget 2004).

(b) cost of living allowance of Rs. 1,000/- adjusted on the basis of COL Index at end June and end December each year (minimum pay increase Rs. 1,300/- per month including COL allowance in 2006).

(c) encashable maximum of 30 days unavailed leave each year based on salary drawn as at 31st December that year.

(d) risk insurance scheme for specific categories to be identified.

(e) rectification of pension anomalies by extending the benefits provided through P.A. Circular 06/2004 to those who had retired before 01/01/2997.

(f) COL allowance for pensioners at Rs. 500/- per month.

(g) interim allowances paid to pensioners consolidated and granted 10% increase on unreduced pension — minimum of Rs. 500/- and a maximum of Rs. 1,250/.

(h) W&OP Act to be amended for widows who re-marry to be made eligible for W&OP pensions.

(j) concessionary duty on vehicles for public servants.

These proposals were endorsed by the President in his Budget Speech delivered on December 2005 together with enhanced Housing Loan facilities up to Rs. 3 million and three days’ paternity leave.

As indicated in Table 1 thereof, the lowest basic salary of a government servant before the issue of P.A. Circular No. 1/2006 was Rs. 7,150/- per month (Rs. 9,350/- including interim allowance of Rs. 2,200/-). The salary payable by 01/01/2006 was to be Rs. 7,900/- — Rs. 10,100/- including interim allowances. The proposals of the NCA ensured an upward revision of the lowest basic salary, inclusive of interim allowances to Rs. 11,630/- per month with effect from 01/01/2007 (Rs. 10,490/- with effect from 01/01/2006). It would be observed that there is much more on offer to public servants than revised salaries.

Unacceptable Demands

President Rajapaksa has very correctly taken up the position that the proposal by some vociferous unions to equate the increases with that given to professionals is ludicrous and the disparity recognises many other important aspects such as professional qualifications, the duration of academic training and post graduate training, the comparative employment prospects available in the private sector and abroad, the need to combat the brain drain in terms of the massive development agenda proposed etc.

In terms of the demands made by these unions everybody can cease their academic pursuits at "O" levels and sail through to the salary scale of Rs. 48,940/- for Secretaries. The narrowing of the percentage increase gap will also not lend to minimizing existing anomalies, especially as a result of ad hoc increases given in the past to various sectors without due consideration to the overall salary structure of the public service.

Management Assistants’ Service

Quite apart from the ad hoc increases in some sectors undue pressure had been brought to bear on the then government to establish Management Assistants’ Service incorporating the General Clerical Service, Government Typists Service, Government Stenographers Service, Government Bookkeepers Service, Government Shroffs Service and Government Storekeepers Service. The whole exercise had been to obtain a salary advantage and not to enhance the efficiency of those who belong to these various categories. Despite the new organization, it is understood that at present the different services go their own way as earlier.

It does not require much intelligence to realise that when it comes to promotions and transfers the extent of the confusion that arises and how inter-changes can take place from one category to the other. Further, the salary advantages had been relevant only for those in Class II (07 increments) and Class III (05 increments) of the new service and not for Class 1 and Supra Grades which appear to have created much dissension and unrest among those categories. And this mayhem, all for the sake of trade union pressure, without regard to repercussions — the sponsors more concerned about their personal advancement rather than their own colleagues in the higher rungs or how it will affect the public service as a whole.

The entire question is in an insoluble state and perhaps beyond repair without creating serious anomalies in the rest of the public service. Just one example of irresponsible action and power without responsibility!


Recommendations vs Decisions

The Budget Proposals 2005 inter alia mentioned as follows:

"The responsibilities of the Council are wide. Apart from continuously monitoring salaries, allowances, overtime, incentives etc. and making relevant recommendations to the government, it has been tasked with developing a national wage policy, cadre management in the public service, review of line ministries and other government agencies, identifying institutional shortcomings, managerial limitations and removing such constraints."

The NCA recommendations implemented through P. A. Circular No. 1/2006 pertaining to the new salary structure has been filtered through the Treasury and the Ministry of Public Administration and finally issued under the hand of the Secretary, Ministry of Public Administration, which takes the final responsibility or it. The NCA recommendations have reportedly had the serious consideration and analysis of many groups of experts well endowed with the relevant knowledge and experience in the public service and had gone through many discussions, seminars and dialogue with numerous trade unions. The recommendations had been objective and not subjective and taken cognizance of the state of the overall economy, the measures to be taken to retain qualified professionals in the public service and in the country and to minimise the brain drain to the private sector and abroad. Wild allegations of conspiracies are without the slightest substance. What need was there for the NCA to conspire? Whatever proposals have been considered as regards ratios prior to the issue of the final determination could be of no consequence in terms of the mandate of the NCA to continuously monitor as indicated in the quote aforesaid and there is no material significance in the reference by the unions to the formula of 1:3.8 which they are harping on. Further, the press release of 15 March 2006 by the Government Information Department regarding the appointment of a new Salaries Commission specifically states that the government has taken a policy decision that for the year 2006 salary structure the ratio between the highest level and the lowest level of public servant should be 1:4.2 which indeed is the ratio recommended by the NCA. Significantly therefore, the government in its wisdom has totally agreed with the NCA recommendations. Ironically, this ratio is a vast improvement from the ratio of 1:6.3 recommended by the 2000 Tissa Devendra Salaries Commission to which a leading opponent of the improved ratio had himself subscribed being a member of that Commission!

The Rebounding Effect

The private sector minimum wage for minor employees range from Rs. 3,500/- to 5,000/- and electrical grades from 7,000/- to 9,00/- per month compared to the minimum wage of Rs. 11,630/- per month for the lowest level recommended by the NCA for public servants. Any adjustments upwards in terms of qualifications, job descriptions etc., would not be realistic and will result in unrest among private sector employees.

The economy cannot bear it either. The demand by the public service unions is for a minimum wage of Rs. 15,630/- per month, (double that of the private sector). Hence, the desire by those in the private sector to compare and agitate for equivalent financial benefits would be impossible to resist without repressions to the private sector and prospective investors both local and foreign. On the other hand the proposed revised salaries for the higher rungs in the public service would still be incomparable with those in the private sector with their liberal perquisites, annual increases etc. The government bill on salaries has to be considered together with pension commitments as envisaged in the Budget Proposals as well as the decision to reintroduce pensionable status to future recruits to the public service. The NCA has been unfortunately made the sacrificial lamb despite the government accepting its formulae. One wonders why? It is a great pity that President Rajapaksa failed to match his words with the deed in this instance. The sacrifice has not appeased the "Gods" in any case. Those who seek the pound of flesh for appearing on public platforms and for electioneering do not seem to be interested in safeguarding the government, the President and the national economy and to co-operate in a viable solution. There lies the paradox!

"Strike" was the weapon of last resort in the days gone by. Now the agitation commences with a strike and its success is assured with every government with liberal hand-outs of strike pay. Sickness is anticipated and due notice given of sick notes. They are paid for fraud and no disciplinary action is taken –– Illan Parippu!!

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Professionals, luxury vehicle owners evade tax

The Island: 29/03/2006" by Don Asoka Wijewardena

Several doctors, lawyers, engineers, private tuition masters and people paying telephone bills upto Rs.10,000 per month are alleged to have evaded paying income tax. Action will be taken to recover the due taxes in accordance with the Inland Revenue Act, Inland Revenue Commissioner General A. A. Wijapala told The Island.

Wijapala said that he had already formulated an effective plan to catch tax and value added tax (VAT) defaulters who had been defrauding the Inland Revenue Department. He added that of the 19.2 million population only 300,000 people had been paying income tax. He said around 17,800 luxury vehicle owners, registered in the RMV in 2005, were also found to be tax defaulters.

He pointed out that the department’s strategy would be to catch the dodgers in order to augment revenue to the department within next three years. He said that he had prepared a project aimed at collecting Rs.176 billion from VAT, Rs.75 billion from income tax, Rs.6 billion from debit and Rs.3.7 billion from stamp duties.

Referring to the VAT refund, Wijapala said that action had been taken to set up an audit procedure and all cheques payable to relevant individuals would be posted and no cheque would be hand delivered. He also noted that due to lack of feedback from customers a plethora of problems regarding VAT refund had arisen and added that it had been solved as Inland Revenue was linked with Customs Department.

Referring to the vacancies in the department, Wijapala said that action had also been taken to fill existing vacancies before July 2006 as the department had been functioning without 539 assessors and 544 tax officers.

He said divisional inland revenue offices, which would register and open files for new tax and VAT payers would also be increased within the next three years in order to accrue more revenue to the department.

The tax Chief revealed that Inland Revenue had been keeping an eye on people travelling to China, Indonesia, Thailand and Singapore on business trips had also been evading paying income tax. He added that arrangements were being made to obtain information on their business activities.

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Tuesday, April 18, 2006

Asia to get tsunami warning system by July, UN promises

APF: 27/03/2006"

Countries affected by the south Asian tsunami should have a warning system against sea surges in place by July, the UN's top humanitarian official said, as officials took nations to task for failing to prepare civilians for a potential future disaster.

UN Under Secretary Jan Egeland, opening a UN conference here, said there was still a long way to go before the early alert system would cover every community in the vast area that was devastated by killer waves on December 26, 2004.

"I think we will have a warning system operational from July. It does not mean every villager in every community will have a system to warn him or her, but we will have regional and national systems," he told reporters.

Egeland and colleagues expressed frustration on the sidelines of the Third International Conference on Early Warning that Indian Ocean rim states were proving slow to take steps to ensure that warnings will reach their people.

"There has been a scientific revolution in the Indian Ocean but states have a way to go to be able to get the message to the villages," Egeland told reporters.

UN Under Secretary Patricio Bernal said Egeland and former US president Bill Clinton had taken to task government officials from countries in the Indian Ocean in a closed-door meeting here in a bid to speed up the process.

"We are not worried about the technical side. At the moment we have 17 sensors in the Indian Ocean and by July we will have 23. If anything happens tonight, somebody will be there to move an alert," he told AFP.

"What we are afraid of is whether this information will flow down. The countries have not done enough. There is a lack of political will," he said.

He praised Sri Lanka for setting up siren systems and drilling school children, but said all efforts needed to be directed from the highest political office in every country to avoid confusion when a climate disaster strikes.

"We had perfect warning when the Hurricane Katrina hit the US Gulf Coast but there was such confusion between the different government levels and we need to avoid this."

Bernal said Clinton had offered to speak to political leaders in the region on a one-on-one basis to help them clear obstacles setting up clear communication channels and legal frameworks for warning systems.

"President Clinton's real aim here is to tell them to get on with it," added another UN source, who asked not to be named.

She said most nations that were struck by the tsunami in December 2004 have not yet put in place communication systems and evacuation paths to help people to safety when then next one strikes.

The area had no sea surge alert system 15 months ago, a fact Clinton said contributed massively to the disaster's death toll of about 217,000.

"There was no early warning system and now we are all living with the results," he said in an address to delegates.

Clinton urged donor nations to make available more money to rebuild devastated communities and to ensure that the new alert system works.

"Recovery is going to take years. Fifty thousand people are still living in tents. I hope you will think of them," he said.

The three-day conference is intended to create warning and fund systems around the world to "cover all countries and all hazards," a plea issued by UN chief Kofi Annan in the wake of the Asian tsunami.

Egeland, who spearheaded international humanitarian efforts for tsunami victims, said the number of people who have been affected by weather disasters had more than doubled in the past decade to 2.5 billion compared to the decade before.

At the same time, the death toll in disasters such as floods and droughts had dropped because governments and the international community had learned to react to advance warnings, thereby saving lives.

"We have to take this lesson and apply it to all natural disasters all over the world, and in particular in Africa," Egeland said.

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Monday, April 17, 2006

Guide on Sri Lanka Education

Asian Tribune: 28/03/2006" By Q Perera

A comprehensive guide on Education in Sri Lanka was published for the first time by Neptune Publications, recently in association with JobsNet – The National Employment sourcing and delivery system Sri Lanka.

The book comprises information on what, when, where and how Education in Sri Lanka. JobsNet recognizes the importance of access to information relating to education and training in order to develop a competitive workforce for Sri Lanka and supported the publication of this useful guide.

Knowledge, skills and training is important and mostly the lack of knowledge on what is available, where is not known among the general public. From the kindergarten to Tertiary and vocational education, as well as other supporting mechanisms of both the government and the private sector on Education. The guide is also available through a web portal, for on-line reference, which can be reached through www.jobsnet.lk

The guide is written in a manner, which allows one to seek alternative schools and colleges for education with sufficient details on different vocational, technical, professional study courses on offer and also touches on the area of education and training for the special child, in a separate section.

The guide would be useful also for Sri Lankans based overseas contemplating to return to Sri Lanka as to how to find out the avenues for education, as well as for expatriates to understand the functioning and facilities offered in the Educational system of Sri Lanka.

The information layout comprises sections in Education system of Sri Lanka, Directory of Educational authorities and institutes, National Universities and institutes, Pre-primary schools and International schools, Private Educational and Training institutes, Foreign Universities, Agents and Representatives, Tertiary and Vocational Education and Education supporting services.

The Guide is priced at Rs. 460/-, is now available at all leading booksellers and at JobsNet branches island wide. The Guide is available in Sinhala, Tamil and English.

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Sunday, April 16, 2006

Quest for new paradigm for development

The Island: 28/03/2006" by Dr. Garvin Karunaratne

The current impasse in world development is perhaps best explained in the words of Rene Dumont, a former French Minister: ‘We are first and foremost exploiters of the poor, because of an economic system based on dominance that has been cunningly devised by and for the rich nations’. (Stranglehold in Africa)

When the newly independent Third World countries, which aimed at achieving economic development and full employment, commenced action through various programmes designed with guidance and advice from the United Nations, and with the help of developed countries and the cream of academia at leading Universities and began to achieve success as evident from increase in production, employment generation and poverty alleviation, the developed countries found that they were losing markets for their agricultural produce and manufactures. Something had to be done and they resorted to subversive methods of neocolonialism. This came in the form of a multi-pronged approach.

The USA came up with the PL 480 Programme, whereby the excess wheat produced in the USA was dumped on the developing countries. The wheat was offered at low prices undermining the local production and this was the ‘bread trap’ to which many countries have fallen as manifest in the boast: We taught people to eat wheat who did not eat it before. While PL480 can be utilised to help crisis situations and support Third World development, today it is used purely to create markets for U.S. produce. Consequently many countries like Mexico that formerly exported food became importers.

Structural Adjustment

Then the World Bank and the International Monetary Fund came up with the Structural Adjustment Programme (SAP), which comprise a number of policies that when implemented together inevitably create a no-growth paradigm that cause poverty and deprivation within any country. The SAP provisions include:

The country should follow a high interest rate policy. This makes local manufacturers and producers obtain money at high interest rates while competitors from abroad use loans obtained at very cheap rates in their own countries. This destroys local production and causes unemployment.

The country has to follow free trade policies and reduce import tariffs and place no restriction on imports. When import tariffs are reduced local producers cannot compete and give up production for the market. This amounts to the creation of an Import and Sell Economy, which leads to increased prices because prices are determined by the high cost of imports. Every developed country has used tariffs on imports in their formative years to boost their local production. Third World leaders are brain washed to think of Free Trade Agreements as achievements; in actual practice local production is sacrificed and unemployment increases.

Countries are advised to deregulate, to have no restrictions on trade and this includes the use of foreign exchange which is liberalised to enable anyone to use, irrespective of its availability. The countries are advised to sell their assets and even to obtain foreign exchange on loans to enable this extravagance which the country can ill afford. Accordingly Foreign exchange restrictions on foreign travel and foreign education and imports are removed. This enables the rich to get unlimited foreign exchange for travel abroad. This money ends up in the developed countries. Even in 1969 when Sri Lanka was not in debt, there were restrictions on the issue of foreign exchange for travel.

Removal of Subsidies is insisted on, while the superpowers can continue with subsidies. What is not well known is that the subsidies offered to producers in developing countries is based on the cost of production while the subsidies offered in developed countries is based on the premise of enabling the farmer to live a life of affluence.

Professor Joseph Stiglitz, the former Chief Economist of the World Bank advocated the continuance of subsidies to avoid the Financial Crisis in Indonesia. In his own words:

"I suggested that the excessively contractionary monetary and fiscal programme could lead to political and social turmoil in Indonesia."

The IMF pressed ahead, demanding reductions in government spending. And so, subsidies for basic needs like food and fuel were eliminated every time when contractionary policies made these subsidies more desperately needed than ever.

Indonesia blew up in riots deposing Suharto and the the adverse effects were still evident when I visited that country in 2003. Stiglitz was actually thrown out of the World Bank for his very words of wisdom.

Privatisation of national assets is insisted upon. When assets are privatised they get into the hands of the private sector where the aim is not national development. The aim of the private sector is to make profits fast and ultimately the assets end up in the hands of foreigners, to whom the goals of national growth and development, the creation of employment are only secondary concerns. Their prime aim is to make profits for the shareholders in their mother country. It is a well known strategy of foreign multinationals to control raw material assets and resources and manage them not in the national interest but in the company’s interest to bolster the sale of items manufactured in the Developed Countries.

Privatisation of assets to raise money to spend on the recurrent budget is advocated. Successes in developed countries are hailed and the reigns of Thatcher in the UK and Regan in USA are touted as exemplary achievements. One needs to know that during the reign of Margaret Thatcher in the U.K. many mental hospitals situated in prime areas were sold and funds raised for recurrent expenditure. The mental patients who were thrown out of hospitals in the process became a burden on the community.

The money realised from the sale has been spent and is lost. In the UK the Railways in the sixties were the showpiece of the world. Privatisation netted millions that were soon spent. Worse was to follow. RailTrack, the private company that was in charge of the track was not interested in spending on safety measures and instead handed over fanciful profits to its shareholders, high salaries and heavy bonus payments to its chief officers. Safety measures used in European trains were not adopted in the UK and the commuters have paid dearly with their lives in repeated rail crashes.

Out of desperation, the UK government had to renationalise Railtrack. In California, the privatisation of the electricity utilities resulted in the private companies overcharging and the attempt by the Governor to control it, ended up costing him his post! These instances expose the ugly side of privatisation, where service and national interest are sacrificed for the personal gain of the shareholders and officers. However the WB and the IMF continue to force the Third World to privatise state ventures.

Privatisation of State commercial concerns is advocated by the WB and the IMF. Accordingly the entire infrastructure that countries have built up for peasant agricultural development like BULOG in Indonesia, the Paddy Marketing Board and the Department of Marketing in Sri Lanka are abolished or privatised. The latter had a Cannery. The Department of Marketing offered floor prices for essential vegetables and fruits thus enabling Sri Lanka to achieve self sufficiency. This enabled farmers to sell their produce at reasonable prices.

The privatised cannery opts for importing fruit. Producers when they fail to sell the produce stop production. Imports take the place of local production. The State has to play a major role by providing incentives and engaging in commercial activities that enable and help people to boost production. This is one method of combating poverty and creating employment. However the WB and the IMF’s SAP prevent such activity.

Devaluation of local currency is advocated on the grounds that the local currency should find its correct value in terms of the theory of supply and demand.

Next, the IMF advises countries to free-float their currencies. Free Floating means that the State––the Central Bank––has no control over the foreign exchange that comes in and allows the commercial banks to determine the exchange rate. The modus operandi is to privatise the State Banks, get foreign banks in so that the currency can be controlled by foreign banks. In reality, the foreign Banks hoard foreign currency collections and bid the foreign exchange value upwards when a large bill has to be paid in foreign currency.

This happened in Sri Lanka in January 2001, when the rupee was free floated and the Rupee plummeted. When the Turkish Lira was freefloated in 2001, the Lira suffered a devaluation of 36%. In 2003, the USA pressured China to free float the Yuan but the Chinese were too wise to fall for that.

The Sri Lankan rupee has plummeted in value from Rs 15.70 to pound sterling in 1977, (when Sri Lanka started following the IMF’s SAP) to Rs. 35 in 1983 and to Rs. 180 to in 2006, recording a drop of 1,046% between 1977 and 2006 and a drop of 414% in the period between 1983 and 2006.

In Indonesia the rupiah has been devalued from Rs. 1,330 to pound sterling in 1983 to Rs. 16,002 to in 2006, a drop of 1,103%. The Turkish Lira has dropped in value from Lira 336 to the `A3 in 1983 to Lira 2,316,733 to the `A3 in 2006, marking a devaluation of 689,400%.

The Ghanian Cedi has been devalued from 5.7 Cedi to the `A3 in 1983 to 15,924 Cedi to the `A3 in 2006, a devaluation of 279,000%! The Nigerian Naira has been devalued from Naira 1.11 to the pound in 1983 to Naira 223 to the pound in 2006––a drop in value of 21,170%.

This devaluation of currencies is done by induced supply and induced demand––all designed to reduce the value of the currencies. Increasing the demand happens when foreign exchange is liberalised as insisted by the IMF, while restricting the supply is automatic because no economy can earn endless foreign exchange to support unrestricted imports and their liberal use. In addition the supply is further restricted by foreign banks that hoard the foreign currency it can get hold of. The IMF plan is to privatise local banks so that foreign banks can act undeterred in their manipulations. It is important to note that the theory of supply and demand is restricted to the textbooks.

Richness of third world countries

I served as a member of the Sri Lanka Administrative Service for 18 years and have worked at first as an Assistant Commissioner and finally at Head of Department level being in charge of a major District in charge of social and economic development. I worked in Bangladesh for two years as the Commonwealth Fund Advisor to the Ministry of Labour and Manpower. Bangladesh is the most fertile country I have ever seen. In my experience, there is no problem of these two countries achieving development- self sufficiency in food and small consumer goods within a few years. I can make this statement without reservation. Poverty Alleviation need not wait till 2015, as envisaged by the Millennium Development Goals. I have traveled widely in Mexico, Turkey, Indonesia and Thailand and can state that there is no necessity for these countries to be indebted or to have their currencies trashed. All these countries have a tremendous potential, with ample land and labor resources. Indonesia too has been advancing in development till the IMF forced them to dismantle the infrastructure the country had built up to help the peasants to become productive farmers. However these countries can develop only if the Developed Countries and their prot`E9g`E9 the World Bank and the IMF stop their manipulations.

The current paradigm of development has totally failed in developing the Third World. Though this process has enabled the development of the Developed Countries; it has caused poverty, untold misery and sheer deprivation in the Third World.

Even the Wall Street Journal has been extremely critical of the IMF. In their words:

"The IMF Drill is as follows. A Third World poor country with a pegged currency is working towards taming its inflation. Instead of a growth formulae, it gets the IMF’s old austerity dosage which slows down the economy. The Banks begin to falter in paying their old debts. The IMF recommends yet more medicine- devaluation making the Bank predicament and capital flight worse. The currency slumps and the banks are now in real trouble`85. Is this any way to run an international monetary system"(Feb22,2001)

It is important to note that though world famed economists like Professor Jeffery Sachs and Joseph Stiglitz have criticized the Structural Adjustment Program and the IMF policies, they have failed to provide an alternative solution. Professor Jeffery Sachs states that by the cancellation of debts in specific instances, by the introduction of petty changes and Safety Nets, extreme poverty can be cut by half by 2015 and banished by 2025. It is my opinion that unless the Structural Adjustment provisions are totally amended, no development can ever be brought about. The current scenario of the rich becoming rich will continue increasing poverty and deprivation. Even The Lugano Report, though it admits that development has so far failed wants a situation where the IMF and the WTO could function as an embryonic International Ministry of Finance, Investment and Trade. Their method is clear- it is through the WTO. For the first time an international body (WTO) enjoys genuine judicial power over trade disputes with regard to all its member states. As stated by the Director of the WTO: We are writing the constitution of a single global economy. The WTO is now attempting to rule the entire world by regulating all countries to conform to globalization in a manner that enables the present paradigm of exploiting the resources to continue further. As Professor Stiglitz states The IMF has forgotten its original mission and seemingly become more interested in ensuring the repayment of foreign loans than in helping the poor countries sustain their economy as close to full employment as possible (The Roaring Nineties).

New paradigm for development

It is time that the Third World countries take a hard look at countries like India and Malaysia where they have managed to follow strict tariff controls, develop their agriculture and industries and keep their currencies intact in value. Mahatir Muhammed showed the entire world that in order to bring Malaysia out of the East Asian Crisis in 1997/98 he had to follow the obverse of the SAP provisions. Malaysia succeeded and that offers hope to every Third World country.

One has to probe the post colonial period experience of development in the attempt to find a solution.

In the Sixties the United States was genuinely interested in finding out how development can be brought about. They selected a poverty stricken Thana (area of 102 square miles) in Comilla, Bangladesh, funded Programs for development with the help of expertise from Michigan State University. This was the Comilla Program of Rural Development. The aim was self sufficiency in food, full employment, the development of agriculture and industries in both the private and cooperative sectors. The colonial administrative set up was overhauled to enable community economic development. The method was to use community development and non-formal education techniques to ‘build people’ in the words of its legendary director, Dr Akhter Hameed Khan. People were empowered through a network of cooperatives to attend to infrastructure development, provide marketing facilities and finance to enable development. In less than nine years the yield of paddy was more than doubled, full employment achieved and the employment created spilled over into adjoining areas. It is an achievement without any parallel in the annals of development. Despite its intrinsic success and that by inputs from the United States, the WB and the IMF ignored it in drafting their SAP.

In 1982, the Ministry of Youth Development of Bangladesh commenced a Youth Self Employment Program, in order to combat the growing tide of youth unemployment. It was based on the development of agriculture, poultry, dairy products and industries. The core elements were: to teach vocational trainees basic elements of economics, encourage trainees to prepare a project to be self employed and start implementing the project, not to offer any subsidies but to offer free training and a fast and efficient extension service- remedial action- technical assistance at the doorstep of the project and all training institutes had to provide extension services when any trainee commences self employment. The thrust was on non-formal education where the abilities and capacities of the youths were built up as they engaged in commercial activities aimed at making them self reliant entrepreneurs. This Program has by November 2002 enabled 709,993 persons to become self employed- derive incomes by creating production. Since 1997, annually 160,000 youths are given intensive training and guidance to become self employed. Upto now over a million people have been found self employment on a commercially viable basis. This is easily the largest self employment program the world has seen. I designed and established this Program when I worked there as the Commonwealth Fund Advisor on Youth to the Ministry of Labor and Manpower in 1981 to 1983.

Both the Comilla Program of Rural Development and the Youth Self Employment Program have stood the test of time and stand as a beacon of hope for prospective developers.

There was once a time when the premier Universities concentrated on teaching disciplines- strategies to bring about development viz., community development and non-formal education. The Universities even directed projects to develop the Third World. I functioned myself as a Research Associate on the Michigan State University Non-Formal Education Project in Indonesia. This was funded by the U.S. Agency for International Development. The earlier mentioned Comilla Program of Rural Development was another such attempt. These were genuine attempts of the excellence in academia fuelled by the magnanimity of the Developed Countries.

The thrust was not only at providing Aid, but to explore ways and means of utilizing the Aid to bring about development. These studies and projects were stopped and in their place sprang up the Non-Governmental Organi-sations. In the Universities studies in Community Development and Non Formal Education were stopped and instead the MBA became the doyen of finding lucrative employment. In the Business Schools the concentration was on methods to make profits, how to get workers to work more, exploring methods of hiring and firing workers, how companies can show profits by selling assets-even by retrenching staff- the aim was to grope for methods to enable profits for the shareholders and in this craze, the aim of rounded development- creating local production- self sufficiency, looking after the interests of the country, the people- their well being and employment was totally sacrificed.

Earlier, in agricultural economics, management techniques and financial analysis were used to enable farmers to become profitable, how small industries could be developed, how cooperatives and marketing systems could be designed and implemented to help a peasant economy. Resource Development was taught detailing sustainable development. In the Faculties of Education, Community Development was taught- techniques used to enable people to become partners in development and for communities to take charge of development. Non Formal Education was taught to equip professionals to guide and enable people to develop their capacities and become self reliant. The Business & Management Studies rapidly gained ground and there was no place for these educational strategies. Instead financial analysis and management techniques were devoted to emass profits for the shareholders. The people were an expendable commodity and the thrust was to enable riches for the rich..

Conclusion

Once when Robert McNamara assumed duties as the President of the World Bank he said that the World Bank had been going on the wrong track. He tried to correct it but miserably failed. The latter part of his tenure is noted for creating indebtedness among the Third World countries. It is time that the World Bank, the IMF and the Developed Countries do understand what is really happening in the Third World and instead of engaging in further exploiting the Third World, commence groping for a paradigm that will usher in development first in their own Developed Countries by arresting the recessions that scourge their economies, eliminating poverty and finally bring about development in the entire world. They have the ability and the strength to attend to this task. Today the attempt of the Developed Countries is to squeeze the assets of the Third World by prise opening them for investment and thereby usher development in the Developed Countries. A paradigm for development based on the tears and tribulations of the people in the Third World is unethical. Let that not continue. Surely there is a paradigm by which development can be ushered in the First, Second and Third Worlds.

In developing this new paradigm for development it is necessary that firstly the IMF and the World Bank should abandon their Structural Adjustment Programme and instead develop a programme that is full of growth strategies. The Developed Countries should consider measures to bring about economic development on a global basis in their own developed countries as well as in the Third World countries. The latter should be helped to develop their own programs and projects that can make their people contributors to their economies and not be relegated to be mere consumers. In this task of ‘building people’ as Akhter Hameed Khan, the director of the Comilla Programme, and ‘developing the abilities and capacities of the people to make them partners in development’ the strategies of Community Development and Non Formal Education deserve to be utilized to the maximum. A further strategy that has to be emphasized is Community Economic Development, where communities handle their own development. In this community leaders are trained to establish commercial ventures on a cooperative basis to develop their areas. The advantage in this is that the commercial venture stays in the community as opposed to a private entrepreneur who with success may move to an area of affluence leaving behind the poor and deprived community within which he sprang up.

To enable the masses to become productive- the lost infrastructure for development should be built up; marketing and technical advice has to be provided. The IMF and the World Bank and the United Nations have to back track to how they attended to bring about development till the Sixties- the pre Structural Adjustment period. It is only then that countries can flower into development, producing their own needs and requirements, providing employment and incomes for their people- a self reliant type of development, aimed at sustainable development- what the world yearns for today. Professor Stiglitz states that Globalization may be inevitable but the way we attempted to structure it- for our interests- was not consonant with our values and ultimately failed even to serve our own interests. The ‘globalization, boom like the stockmarket boom and the economic boom, was followed by a bust, and partly because as in the case of the other booms, they had within themselves the seeds of their own destruction (The Roaring Nineties).

A new paradigm for development has to emerge which includes all that is good within globalization, with prosperity for all people.

Let us hope that the leaders of the Developed and Third World Countries, the mandarins of the World Bank and the IMF, the Presidents and Vice Chancellors of the premier Universities- the depositories of academic excellence, may take on this challenge in the name of humanity. I do wish to be associated with any authority that takes up this challenge.

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