• No control over goods prices in market 
• Economy cannot be resurrected overnight

By Sarah Hannan Sri Lanka’s economy continues to suffer further as the present pandemic keeps pushing a majority of people below the poverty line. The increasing cost of living (CoL), the shortage of certain food commodities which has tipped the retail prices of essential goods, and the increasing inflation seems to be adding further weight on the regular citizen.  This week, Minister of Trade Dr. Bandula Gunawardana was on The Sunday Morning Hot Seat to discuss the long-standing issues that have hindered the growth of Sri Lanka, and how the present Government plans to bring back economic stability to the country amid a global pandemic and the ever-rising CoL.  Following are excerpts of the interview. The issue of cost of living is now affecting people across the board. As Trade Minister, what action have you taken to address this issue?   The cost of living issue needs to be looked at closely. Between 2015 and 2019, during the Yahapalana Government, many of the local production lines and production processes saw a downfall.   Even if you take the agriculture sector, yields of crops, such as paddy, onion, potatoes, green gram, and cowpea, reduced and the market share for the local agri products too reduced. This was mainly due to the previous Government resorting to importing all that could be produced in Sri Lanka.   The market was flooded with these imported products that could be sold at a cheaper price, which was the strategic approach that the Yahapalana Government followed at the time. President Gotabaya Rajapaksa, for the first time after 70 years, took a decision to ban importing any product that could be manufactured or cultivated locally.   Accordingly, importing commodities such as rice, turmeric, cashew, ginger, maize, and ulundu was banned. Due to the restrictions that were imposed on imports, until the yields of the local produce were accessible to the market, these commodity prices increased.  If required, the Government can bring down the rice prices to Rs. 85 per kilogramme, that is by importing rice from India. We are unable to follow this method because we now have a policy that we are strictly following. Therefore, we have to request the citizens of this country to bear these inconveniences for a short period of time, until the local production comes back online.   Once the local produce yields are reaped and the market is supplied with sufficient commodities, the cost of living will come to a more manageable point.  Therefore, if you think I hold the answer to the increasing cost of living, that is incorrect. The cost of living and the prices of goods will become stable once the entire country's production process and supply chain is streamlined to give local products more priority and market share.   How effective have the actions taken by the Government to bring down commodity prices been?   The Government can only have somewhat of a control in terms of reducing taxes, announcing price controlling mechanisms, and rationing the goods to maintain a constant supply.   But this method of the Government having to intervene from time to time to control the prices is not a feasible option, and it has been proven even in other countries. If the country’s local supply chain gets sorted out, then automatically the price stabilisation will take place.   We need to also consider the global economic situation that has been presented by the Covid-19 pandemic. International supply chains have been disrupted due to the travel restrictions and then should the limited number of airports or seaports in operation go under isolation or lockdown, it presents further challenges.   For instance, when perishable items arrive at the ports and if the ship needs to be rerouted to a different port, the goods that are in the ship can perish. That too can cause a food shortage which in turn causes the prices to increase.  The Opposition MPs are forgetting that this country has seen way worse economic situations, especially after World War II, when the entire world faced famine and had to resort to eating bird feed and horse feed, as there was a scarcity in food supplies.  This is not a unique situation Sri Lanka is facing alone. Covid-19 impacts the entire world and even the so-called super powers are also undergoing a similar economic impact. Therefore, it is unfair that the Opposition is requesting us to control the increasing cost of living.   Another factor that needs to be considered is that during a normal year, during the festive season, the prices of goods naturally increase due to the heightened demand for goods by the consumers.  Some relief measures announced by the Government have not been felt by the general public. Why is that?   We need to understand that just because the Government reduces taxes on goods, that alone will not provide a noticeable relief to the general public. Even if the prices are supposed to reduce due to the tax reductions, the pricing in the world market might have increased during such time. In addition to that, the conversion rate from USD to LKR will also be a deciding factor in the pricing. If the amount of rupees that should be spent on purchasing goods is higher, automatically the price of the retailed goods will also increase.   President Gotabaya Rajapaksa reduced import taxes on four goods so that the pricing can be controlled somewhat. Sugar, dhal, big onions, and canned fish products were the commodities for which taxes were reduced to a flat rate of 25 cents. But the tax reduction was not felt by the consumer due to the previously stated reasons. In addition to that, some traders refusing to sell goods at the reduced price, even after the taxes were slashed, was an attempt to sabotage the Government’s good intention to ease the cost of living.   From 2021 onwards, the Ministry of Trade is looking to closely work with the trade councils to hold monthly price revision meetings to stipulate maximum retail and wholesale prices for goods and get into an agreement with them, so that pricing would be stable throughout the month.  Opposition politicians claim that despite gazettes issued to minimise prices of rice and sugar, the anticipated reductions have not happened in the local market. Why is that?   I agree with the Opposition on that statement. The Government has no control over the market prices for goods. The Government issues a gazette considering the plight of the consumer. We can just be bystanders and allow the market to decide on pricings for goods each time. What the Opposition is suggesting is that the Consumer Price Index should not be tampered with by the Government and should be able to set prices for commodities in an independent manner, but that will be disadvantageous on the consumers’ end.   For instance, we stepped in when the coconut prices were uncontrollably increasing and a coconut was priced at Rs. 150. The Ministry of Plantation Industries reached out to the Ministry of Trade and said that immediate action needs to be taken to control the coconut prices. We then issued a gazette stipulating a maximum price for a coconut at Rs. 70. It is because the Government intervened that the consumers are able to purchase coconuts at Rs. 80 and not at Rs. 150.   What the Opposition was suggesting that our Government do was to not to issue a gazette controlling the price, not to intervene at all when the prices are increasing in the local market, but to import the goods at a cheaper price from another country and sell it to the consumers. What they do not understand right now is that we are dealing with a pandemic and even importing these commodities will be quite challenging, as we do not have enough foreign currency revenue coming into the country.  The Opposition is suggesting an overnight resurrection of the economy in a challenging backdrop as this without understanding the full impact that the current economy is undergoing.   There are accusations that a few businesses have prevented the reduction of sugar prices despite taxes being reduced. What action has the Government taken?   The Consumer Affairs Authority (CAA) has been tasked to take legal action against such errant traders and businesses. But unfortunately, due to staff limitations, the CAA is unable to raid all these establishments and take action.  As the Ministry of Trade, we are currently initiating a programme to bring down the prices of several other goods, other than the essentials, through the State Trading Corporation (STC). For instance, surgical facemasks are considered to be essentials these days; the pricing of these facemasks was at Rs. 30, Rs. 50, Rs. 100. We have now been able to introduce a controlled price for them at Rs. 20. These facemasks will be sold through the STC, the Dasa Group, and are to be SLS certified. Once we upgrade the production equipment and improve the stock, we will be able to sell a facemask at a further reduced rate.   Under this initiative, we are reducing the prices of about 50 products after signing agreements with the manufacturers who will agree to supply these goods to state-owned trade institutions such as Sathosa and the co-operative network. The agreement would be signed by the STC and the manufacturer.   This price reduction will also be introduced to the village through the Q Shop initiative, where a supermarket is to be built inside a container which will operate from 10 a.m. to 10 p.m. The Q Shop will function under the franchising model, which will greatly assist the Government in reducing the cost of living and the cost of goods by the end of 2021.  What actions do you think the Cost of Living Committee could take to provide relief to the people?   The Cost of Living Committee is scheduled to meet on Monday (21), where the Minister of Agriculture, the Minister of Plantation Industries, and the secretaries of the other ministries would take part inclusive of our Ministry. We are looking at discussing the increasing cost of living and deliberating on what additional steps we could take to it bring down.  You referred to the arbitrary actions of a few all-powerful officials in the Government. How have these officials bypassed the Cabinet of Ministers?   This is not a new issue and it is not an issue that the present Government alone is experiencing. The issues have been deep seated during the tenure of several previous governments as well. There are officers in the state service that have purposely hindered development work that each successive government wanted to carry out.  The best example is that during the tenure of former President Mahinda Rajapaksa and at the time when I held the position as the Minister of Education, I proposed that the technology stream be introduced to schools with the subjects of engineering technology, bio-system technology, and science core technology. The proposal was made in 2013 and the Treasury only issued me instructions permitting to test the curriculum in 100 schools in 2016.   If not for former President Mahinda Rajapaksa’s keen interest, Sri Lanka would not have the technology stream in schools. We also established Mahindodaya technology schools and 250 tech institutes, amid strong opposition from some of the officials that were in the Treasury.   What I revealed in Parliament this time was that if we are tasked with the challenge of earning foreign currency revenue we need to encourage the export sector of this country. Most of the export businesses are managed by the private sector. Therefore, to encourage the private sector to improve their exports and bring in dollar revenues, we need to provide them an incentive that will be paid to them in Sri Lankan rupees. Countries such as China and India follow this model. In order for us to pay these incentives, the Government too needs to have sufficient funds.   For instance, if the exporter brings in $ 1 million revenue to the country, we need to pay them an incentive of 5% of the total value in Sri Lankan rupees. We need to make room for these businesses to participate at international trade fairs; these businesses should also be given funds to conduct promotional activities overseas, as they will not be able to bear the entire cost themselves.   As a government, we will have to look at supporting them with promotional campaigns and business development opportunities. We need to also equip them with state-of-the-art technology to improve their production and help bring down equipment.   These are generally afforded through a county’s Export Development Fund; the monies are earned for that fund through CESS that is imposed for imports and exports by each country. The CESS is to be credited to the said Export Development Fund.  The Treasury officials over the years have not credited the CESS to the Export Development Fund, they have absorbed it to the Treasury.   So, even if the total CESS earning was Rs. 50 billion, the Export Development Board is only allocated Rs. 300 million for their promotional work. How can one develop the export sector with just Rs. 300 million?   I reminded the Parliament that the authority over such monies is held by the Parliament and that these officials are not allowed to utilise these funds as they see fit.  Why has action not been taken against these officials?   The 70 year-long corruption that is taking place is now unravelling when the Committee on Public Finance and the Committee on Public Enterprises are appointed to question these wrongdoings and corruption. The relevant officials are now being brought to these committee hearings, so they could be answerable and accountable to any of these misappropriations.   I am not personally blaming the officials; I blame the Parliament that failed to question these officials all these years. They are drawing a salary that is paid for by the taxpayers of this country, they have a responsibility to hold these officials accountable for utilising the tax that is collected.  The economic impact of the Covid-19 pandemic is to continue next year as well. How will the Government address this issue?    We need to consider the global situation, and the country’s situation, and look at addressing issues that are prevailing regardless of political, party, or cultural differences. We have a responsibility to create awareness among the public about the actual situation; this level of awareness will help us re-establish the economy and come back with a stronger plan to revive the socioeconomic condition of this country next year.   The Government already has a clear vision on how to develop the country through the “Vision for Prosperity”. However, that proposed development programme will not be able to have a smooth roll-out, as the economy of the country is continuously destabilised, starting with the Easter Sunday attacks and now the pandemic.   From January 2021, we will have to carefully consider the steps that we need to take by holding critical discussions among political party leaders and economic experts.  What will be done to address the loss of jobs and income?   The Minister of Labour has already taken these matters into consideration and has adopted several measures to ensure that factories would not face closure and ensure somewhat of a job security to the workers.   Like I said, it is not an issue unique to Sri Lanka, but is experienced the world over.  Moreover, to improve the local industries and production sector, we have proposed a programme through the 2021 Budget to attract investment from local and foreign investors that would put these monies into productive use.   This will allow monies that are held without tax declaration offshore to be brought to the country by paying a 1% revenue tax to the Inland Revenue Department and to be invested in the agriculture, service industry. If we maximise the utilisation of such investments, I believe we will be able to see a revival of local industries in 2021.  What about the decline in foreign remittances by Sri Lankan migrant workers?   We are looking to set up special consultation services for Sri Lankan migrant workers that are returning to Sri Lanka due to job losses. A database is already being created where they could enter their skill sets and based on this information, we will look at enabling them to set up small enterprises using their skills while helping them reach the international market.