Editorial

Desperate situations may require desperate remedies and the Government’s Budget proposal to allow undeclared monies (hora salli) to enter the mainstream economy shows how desperate it is.

Notwithstanding little irritants like best business practices getting in the way, many Governments worldwide adopt these measures from time to time. These are like amnesties for businessmen — even politicians, who cannot account for their money coming through legitimate means. The Government’s Budget proposal is to allow such cash, stacked away under the proverbial mattress to be washed, rinsed and pressed — in other words ‘laundered’, with a token 1 percent tax. And hey presto! It’s a gymkhana for liquor magnates, casino owners, commission agents, politicians, smugglers, the entire gamut of them to turn squeaky clean.

Sri Lanka has unfortunately acquired a bad, if not notorious reputation in the international financial markets for money laundering. The European Union listed Sri Lanka as such a country giving cases of money laundering one of which was the casino-bank-real estate route.

It seems the Government’s economists want to emulate the two financial hubs in this part of the world, viz., Singapore and Dubai. These city-states are centres for ‘hot money’. They are two advanced economies, along with most developed economies having their capital accounts fully liberalised unlike developing economies — like even India and China, and Sri Lanka — which have only partially liberalised economies. Alas, any full liberalisation will destabilise these fragile developing economies.

When the former President asked for certain bank account details from the Emir in Dubai, or when the former Government called for the extradition of the former Central Bank Governor of Sri Lanka, both countries refused because investor confidence was paramount, and to hell with cooperation on corruption. These two trading nations have capital accounts where foreign exchange transactions are open. Only large sums come under scrutiny. Sri Lanka is trying to emulate the Singapore and Dubai systems with confusing, contradictory foreign exchange controls and restrictions.

This same “No Questions Asked” policy which the present Government launched earlier on April 8 drew only USD 90 million in three months (up to July 18) when a special deposit scheme was opened and foreign exchange controls were somewhat relaxed for this ‘dirty money’ to enter the economy. This amount is ‘peanuts’, and such schemes are unlikely to succeed. The persons, therefore, most likely to benefit from the relaxation will be those within the country and their front men residing abroad who can invest the undeclared cash in domestic entities and thereby turn ‘dirty money’ into ‘whiter than white’ money.

The Colombo Stock Exchange had been once termed ‘The Laundry’, a onetime ambassador of this country is facing money laundering charges abroad, a US lobbyist is under trial for misappropriation of funds remitted by the Central Bank of Sri Lanka outside the control of Parliament, pyramids schemes, Bond scams were all under the direct management of dubious Governors.

It is understandable to a point that the Government will need to chase after every dollar. But if the principle of the Budget is that the business of business is business, it cannot have duplicity in exchange controls for some, and not for others.

Already, the Government is being criticised for its closed economy policy on current foreign transactions. If it wishes to turn the future Financial District (Colombo Port City) into such a Singapore or Dubai style financial hub but without the open capital transactions, which it can ill afford to have, yet, it will be a difficult proposition. Draft laws handed over to the Prime Minister and Minister of Finance in January are now being revisited by lawyers under the personal supervision of the Presidential Secretariat.

In the meantime, international rating agencies have downgraded Sri Lanka’s economic standing and that is not a good thing for genuine foreign investors studying markets, whatever the Finance Ministry releases may say.

Premature re-opening of schools

These decision-makers in the Education Ministry were hell-bent on conducting the GCE Advanced Level examination recently in a bid to showcase normalcy despite a surge in COVID-19 cases through the country. Those students had no option but risk their lives sitting for the exam lest they lose a whole year if they didn’t. Some of them detected with the virus were forced to sit the exam in isolation centres. Child psychologists, seemingly not consulted by the authorities, disapproved of this exercise, even though they see the need to reopen schools as early as possible.

It is clear from what happened this week that parents were justified in not sending their children to school. On the one hand, the Government was urging people to stay at home as the number of COVID-19 positive cases and deaths spiked all over. On the other, the Education Ministry was ordering children to school. The average attendance was only 50 percent on Wednesday. This was still with only half the total number of schools open in the country. And then, schools in the Kandy district, in Ambalangoda, where the national schools recorded zero attendance – and elsewhere, had to shut down as the pandemic took its toll. Clearly, it was too early to reopen schools.

There were complaints that though the Health Ministry guidelines were to be adhered to, and the Presidential Task Force had given its nod for this exercise, public confidence in the Government’s measures is at a low ebb. Given the ever increasing number of cases and fatalities, this is understandable. Trade unions complain that though health officials were consulted, teachers and principals who are in the frontline, were not.

Some of these schools have been under the defunct Provincial Councils and the Central Government has lost control over them. A sum of Rs. 105 million allocated to disinfect schools had not reached some rural schools, and schoolchildren were asked to do the disinfecting themselves. Ancillary services like transport for the children were not adequately looked into.

Another problem brought on by the coronavirus pandemic — the need for social distancing — will get even further aggravated since the Education Ministry is seeking to increase the number of students in a classroom. The Ministry ought to get its act together first, before frog-marching children to school on a political diktat.