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No investor will come to a country with a food emergency: Harsha de Silva

07 Sep 2021

  • SJB MP Dr. Harsha de Silva claims Government sending wrong signal to the world 
By Shahaen Vishak  Last week, President Gotabaya Rajapaksa declared emergency regulations on the provision of essential foods. The stated aim was to prevent traders from hoarding stocks of essential food items to create an artificial shortage and charge exorbitant prices for them. The Government has justified the emergency regulations stating they allow the confiscation of these stocks while setting a price ceiling to benefit consumers.  However, this move resulted in several international media agencies reporting that Sri Lanka was undergoing a food crisis so severe that it required a state of emergency, while fears were sparked locally of essential commodities being rationed out to citizens. State Minister of Money, Capital Markets, and State Enterprise Reforms Ajith Nivard Cabraal subsequently pointed out these stories as being “fake news”, further alleging that parties with vested interests, including the Opposition, had misled the media towards this end, resulting in Sri Lanka’s situation being unfairly painted in a bad light.  In this backdrop, The Morning spoke to Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva, as both a member of the main Parliamentary Opposition party and an economist, for his input on these claims and his view of the country’s economic management.  Following are excerpts of the interview:  What is your response to State Minister Cabraal’s claims that the Opposition has helped mislead international media with the news of a food crisis in Sri Lanka? The Government has scored an own goal. They could have dealt with the situation through existing legislation, or by bringing in amendments to the Consumer Affairs Authority (CAA) act, or through some piece of legislation that gives it additional power to deal with the pandemic in terms of the health emergency, but they didn’t do that. Instead, they brought in the emergency regulations. The Opposition didn’t do that; the Government did.  Having brought the emergency law, people immediately started to panic, and news agencies started reporting it. The Opposition had nothing to do with that. Now, after bringing in the emergency law, to say that it has been misrepresented, is quite ridiculous. Who brought it? And if it was not necessary, why did they bring it?  First, they got the Presidency. Then they got a two-thirds majority. Then they got the 20th Amendment. Now with all this power, they want to declare an emergency. How much power do you need to run a country? This is a self-created problem, so don’t blame the Opposition or the media, because the Opposition’s job is to be constructively critical of the Government, and the media is responsible for reporting the facts.  Do you feel that we need price controls on essential commodities?  We will need price controls on everything as long as we keep printing money. The day we stop printing money, we can start removing price controls and prices will stabilise in the market. If you keep printing money, the exchange rate will keep falling, and prices will keep going up. It’s simple logic.  The Government is justifying that the emergency law was not brought about due to a food shortage, but rather to control hoarding. What is your stance on this?  To control hoarding, there is a Consumer Affairs Authority Act, which deals with sugar, dhal and other commodities. Then you have the Paddy Marketing Act, which deals with the hoarding of paddy. So why on earth did they not use those regulations? If, on the other hand, they felt this was because the punitive action was insufficient, they could have just strengthened the Consumer Affairs Authority to increase the fines charged on hoarders. Instead of doing these things first, they opted for the emergency regulations.  We opposed the emergency law, as it is not necessary. Why do you need a jackhammer to deal with something that could have been dealt with using a screwdriver? And then to blame other people for the fallout, it only shows the inept and dysfunctional state of the Government.  You stated that the media’s interpretation of emergency regulations as a food crisis is understandable. Do you think this will also send out a negative signal internationally in terms of our debt commitments?  Absolutely. Before an investor comes on, there has to be fundamental stability in the economy. On the one hand, these include factors such as democracy, human rights, rule of law, and such institutions. Then you have the basic human requirements, food and shelter. But no investor will want to come to a country with a food emergency, where the Government itself is saying, “Look, we have a problem with food”.  We already have issues with democracy, human rights, and rule of law. We also have issues with debt sustainability, economic management, and the crashing rupee. Now on top of all that, the Government has imposed an emergency to control food prices, indicating that a basic necessity of human survival is under threat. Then who will come? They have made a serious blunder and I think they should withdraw this. This is shooting ourselves in the foot, and the SJB opposes this measure.  How amateurish is the Government here? You certainly don’t want to send out the message of a food emergency to the international community; it is the exact opposite of what we need at this point in time. The entire connotation of using the military to control the market is a no-no. You bring the military to control food if you’re in absolute trouble. If we’re not in absolute trouble, and this could have been done using existing or amended legislation, then why did this happen?  Is there a possibility that this may be a pre-emptive move by the Government to prevent any chance of a food crisis, considering that there is a foreign exchange shortage that could hamper our ability to import food and hoarders looking to profit from an artificial shortage?  They may think that, but even so, it is not going to work. Let's say the military went in with all their power and broke open all these go-downs and warehouses, then took all the hoarded stocks out and sold them. How long will those stocks last? One or two weeks? Maybe three or six months? After that what happens? It is not a long-term solution. I was the first person in the Public Finance Committee who asked for a forensic audit of the sugar scam. But the Government didn’t do it. Two or three businessmen got together and made filthy profits. But the Government didn’t have the backbone to control them, for whatever reason, and got Sathosa to purchase these stocks and sell them at a loss. Because no action was taken, this continued, and they kept on hoarding. These hoarders should have been criminally prosecuted, but no action was taken whatsoever; perhaps because they were close buddies of the Government. If they had taken action then, would they have done it again? And now the Government is purchasing these “confiscated” stocks at a profit to the hoarders. So no action has been taken against these hoarders, and the only result of these emergency regulations was to damage Sri Lanka’s image on the international stage.  The Government is dealing with an unprecedented crisis that no other government had to face, in the form of the pandemic – all key revenue sources have been hit, while it needs to allocate additional resources to the health situation on the ground. As an economist and an Opposition MP, what are your recommendations to the Government in dealing with this situation?  I think the utmost priority of the Government should be saving human lives. During the previous Government, over 250 lives were lost because warnings were not heeded. That was a huge failure. Likewise, this Government was warned by multiple specialists. In March, Dr. Ravi Rannan-Eliya, a globally recognised expert, called for the country to be closed during the April holidays, and said that if the previous Government had been criminally negligent, then this Government could be far worse.  In 2019, intelligence warnings were ignored and over 250 perished; now, medical experts’ warnings were ignored and over 200 perish every day. So the Government can’t say this is unprecedented and they can’t do anything about it. The fundamental objective of any government should be to secure human lives.  Therefore, priority number one would be human lives. We need to control the spread of the infection, for which we need to complete vaccination while maintaining effective restrictions – not like our current restrictions, where people are still outside and going to work.  Then, we have to re-prioritise expenditure to support the people impacted by the lockdown. Right now is not the time to spend money on things like the jogging track around the Parakrama Samudra. Is that what we need at this point? Let’s look after our own brothers and sisters who are facing difficulties at this time.  Finally, we have to deal with reality and understand that this alternate economic model – of import substitutions supported by money printing – has not worked anywhere and will not work in Sri Lanka. We have to join global production networks, becoming a dynamic player in the fast moving global economy, and then our people can benefit from good jobs. They can again begin to dream of building a house, buying a car, going on vacation – but everyone is thinking of leaving the country now. We have to open Sri Lanka to the world. 


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