Top Ministers share key insights with American Chamber members
Friday, 6 March 2015 00:06
Senior Ministers and policymakers were in attendance for an interactive breakfast meeting organised by the American Chamber of Commerce. Participants at the event included Minister of Health Rajitha Senaratne, Minister of Power and Energy Patali Champika Ranawaka, Minister of Finance Ravi Karunanayake, State Minister of Defence Ruwan Wijewardene and former State Minister of Higher Education Rajiva Wijesinha. Following are excerpts from an open question and answer session: By Channa FernandopulleQ: There are rumours about the formation of a National Government which we would like to get some clarity on. Also with regard to health sector we would like to know if there is a national healthcare policy in the making?Senaratne: There is already a National Government in the sense that while the TNA and the JVP are in the Opposition, they actually sit with us on the National Executive Council. We have also invited the SLFP to be a part of our Government as we had promised in our manifesto.
We had stated that once we win the election we will have a National Government with all the parties in the Opposition. The problem was that they had stated after discussions with us that they wanted to support our 100 day program while remaining in the Opposition so we held a two-day workshop at Katunayake and discussed these issues and finally the SLFP agreed to join the Government. They had a discussion with the President and agreed to join based on 10 policies; like the 10 commandments.
With regard to the national health policy, SLFP leaders have spoken to me and they also want a national health policy in addition to the national educational policy so that will be a good thing because the entire Parliament will then be active in Government. The only problem here is that we will have to increase Cabinet portfolios, the number of State ministers. The next constitutional reforms will propose amendments to abolish the executive presidency and bring in the mixed parliamentary system. We also discussed the same proposal to go for a Cabinet of 45 members with a National Government and 55 deputies and State ministers so I hope that it will be formed very soon.
In terms of the health policy I have been involved with the medical profession for the last 15 years so therefore we have already got a lot done. We had discussions on many policies but the main problem today is chronic kidney disease. We have started certain projects in relation to this issue and I appealed to the business community to help. The American Government and USAID have both promised my friend Ravi Karunanayake he told me that they have said they will give him the funds, the majority of which will go for health.
I also appealed to the business community to help the Government with good projects in the country and I plan to introduce a proposal to produce pharmaceutical drugs, materials and equipment as much as possible in Sri Lanka using FTAs with India, Pakistan and China. There will also be duty concessions and BOI concessions so I appeal to business leaders to bring investors and join us in helping to produce our own drugs, our own materials and our own equipment not only for our market but also for our neighbours. We will form a national health policy and before it is implemented I will come before you and discuss those proposals.
Q: You have stated that you wish to introduce renewable energy to Sri Lanka. What will happen to the coal power generation if this is implemented? Ranawaka: We’re now exploring possibilities to get us to 100% renewable energy by 2030 as per the draft energy strategy we are working on. We have installed 900MW of coal power in Puttalam and another 500MW in Sampur and those will act as the base-load for our industrial consumption but in the meantime we are looking very strongly at renewable energy but we are facing some constraints.
Firstly, there are technical constraints because of the nature of the energy, and secondly there are financial constraints. Renewable energy is a costly affair when compared with energy like coal and gas but globally scientists are trying to solve these problems and we hope that by 2030 mankind as a whole will be able to resolve these issues and thereafter we can all use renewable energy globally.
Coal, oil and gas are exhaustible energy sources. By 2040 oil as a source of fuel will be exhausted and by that rate coal will be exhausted by 2050 by so we need green energy in the grid, and a transportation system that will cope with these changes. These ideas are still in the draft stage and your feedback is needed to fine tune these proposals.
Q: You have been vocal about our own oil and gas reserves in the past. What is the current situation with gas and oil in the Mannar Basin?Ranawaka:As far as gas and oil exploration, there are two phases. In the exploration phase, we’ve done seismic surveys for Mannar and we have all data for Cauvery Basin and we’re doing more surveys in other parts of the country as well.
The second phase is the development phase. We have found two gas deposits in the Mannar Basin with CAIRN group and we’re trying to develop upstream infrastructure to tap these gas deposits with a pipeline that we hope will be in Norochcholai by the end of 2016 and thereafter we will bring this gas out and we hope to use it for fuel at CPC. There is a lot of work to be done in legal, financial and infrastructure development. Thereafter we have the production phase, and we’re looking to see how this phase can happen and we’re preparing an aggressive action plan to tap these resources but our long-term goal is to become self-sufficient in energy since at the moment 45% of our energy requirement is imported and this creates a serious foreign exchange problem.
During the 100 day program, we prepared an action plan to change the structural problems with CEB and CPC and we are also introducing ISO standards so that these two institutions – which are the biggest corporations that the Government owns – will be technically sound. We’re trying to grapple with the problems within these organisations. As you know the previous Government had enmeshed the power sector with the banking sector and so we have to solve this problem and decouple them so that the CEB and CPC can act as monetarily autonomous bodies. Charging points for electric cars will also be introduced in addition to a new pricing formula for energy that is objective in nature. We hope to introduce this new cost reflective pricing formula from June.
We will also introduce a time of use formula for electricity so that from 10 p.m.-4 a.m. – that’s our off-peak hours – we will reduce your tariff so that you can charge your cars and use this time space for industrial use.
Q: What is going to be done with Mattala Airport? Also we would like to know if your Government is looking at the creation of private free trade zones?Karunanayake:Our intention on that white elephant is that we will get the maximum use out of it. We’ve got Boeing, Airbus and Lufthansa speaking to us to see if they can bring some of their maintenance here so we’re trying to maximise the best of an investment of about $ 40 billion that has gone into it. So the process has started and when I last visited America we had some interesting areas in the logistics field. These are matters that we will open up to society and we will look at business proposals as they come in and evaluate them and award contracts.
With regard to private free trade zones, I guess there’s no necessity to have these if the free trade zones that already exist are run properly however a decision on this will also depend on the degree of investment being offered. If a critical investment comes in that requires such an area then we will consider it. There’s one investment into the Trincomalee port for 1,000 acres of land which we are looking at with a little suspicion and we will have to re-examine that but we will certainly call for use of existing free trade zones to be maximised.
Q: Super gain tax, how can you guarantee that it is not going to open the path to retrospective taxation by future governments?Karunanayake: We were very serious when we said that it was a one-off tax. In many areas we found that there was a distortion where assets of the country were given away for nothing and we had to do something to rectify this situation but let me reiterate that when we say one-off we really mean one-off. Using this tax we expect to collect about Rs. 90 billion and we ensure that it is there for this year.
If I may give one example, on the Excise Commission area we have collected 4.8 billion more in January than what was recorded in December 2014, that’s just on clean governance. We only anticipated a Rs. 4 billion increase in excise revenue for 2015, but we have collected Rs. 4 billion in one month so you can see a hidden revenue of Rs. 50 billion just there alone. Inland Revenue Department increased their revenue in the last 30 days by over 33% while Customs moved up from Rs. 14 billion to Rs. 31 billion all in the last 30 days. Where has this money been going before?
This is why we want to get a proper estimation of the real revenue because people are taxed beyond what is acceptable but the revenue collection processes have leaked and that’s what we want to plug now so on an annual basis we can easily get a Rs. 100-150 billion more without taxing anymore and we will certainly ensure that committed costs for 2015 onwards will be done with financial discipline. We were able to bring the budget deficit down from 4.8% to 4.6% and that’s the reason why we had such a warm reception from the World Bank and the IMF so taxation policy will be very consistent and from 2016 we will have a maximum of 15 taxes and that will ensure that compliance will be high and we need all of your support in this.
Q: What is the situation with the Avant Garde Maritime Security investigation?Wijewardene:The Avant Garde issue is still ongoing but from what we can see they have been issued all the right licences by the previous regime so the problem is that while they were technically operating legitimately, we have to go and look at who exactly gave them these licences. This has turned the investigation towards Rakna Lanka which is a private company owned by the Ministry of Defence. We need to see how the foreign exchange was coming into the country and what the basis of the profit sharing was. I actually questioned the Board of Directors of Rakna Lanka about the profit sharing mechanism and they couldn’t give me a straight answer; they each gave different answers varying from 11% to 14% to 16% so I propose to do a financial audit for Rakna Lanka and once approval is given for this we will be proceeding with the audit.
As for the position with the CID, the investigations are going through and we want to have a thorough investigation. We don’t want to be like the previous regime. I think we all saw how just after the last presidential election they went and arrested General Sarath Fonseka and they basically pulled him out and threw him into jail. We don’t want to do things like that but instead we want to allow the CID to carry out a comprehensive investigation, get all the facts which will be presented to Courts and then through the judicial system, the perpetrators will be punished.
Q: Can you describe some of the problems facing our education sector today? Wijesinha:I’m afraid our State monopoly on education has been moribund and has been dragging us further and further down. I’m horrified that we’re accusing the last Government of letting standards down by allowing some foreign universities while they aren’t worried at all about the standards in our own universities.
As a liberal I don’t like Milton Friedman but I find that with regard to economic courses in this country, the students don’t even know who Milton Friedman is! I was told by a student that they only study Adam Smith and John Keynes! But the real horror is the failure of good governance in terms of introducing all these things. I think it’s absolutely essential to have a new Act and in all fairness to my predecessor, he introduced a new Act which took two years in the Legal Draftsman’s Department before it was ready.
I have done three things before I resigned effective from last week and I hope people will help whomever my successor might be to take these forward. These are all designed to promote openness within the system.
One of them is a new Act that specifies responsibilities of the Minister. I was horrified that the previous Act had outlined the powers of the minister but had no section on responsibilities. You have to have a vision for higher education so I put that in also. I think we need to make sure that councils are accountable including faculty standards and I hope you will encourage my successor to follow that.
I’ve also suggested that we broad-base education including in the regions because at the moment we have a situation where students spend 18 months between school and university. No other country in the world has this type of a situation. When I went back to public sector 20 years ago, the Americans very kindly suggested that I go and watch Bill Clinton being re-elected but I told them that I wasn’t really interested in politics but that I’d like to look at the education system because the Americans have a much better system of education than the older British system.
It is open ended and gives access to more people allowing them to come in and out and I think all of you should work towards that, to set up the equivalent of community colleges, language centres and the development of entrepreneurship skills. I think the education system today kills students, it promotes rote learning and deprives them of the ability to set up businesses of their own and it deprives them of the capacity to move industry and technology into the regions; why are we so Colombo heavy?
I think when talking of technology, we have wonderfully bright kids but have done nothing about science and technology in rural schools. One of the tragedies is that we have just not bothered to analyse conceptual skills.
Seventy years ago when free education started our first Prime Minister – probably the most visionary we ever had – was accused of being against the free education system. He gave a superb speech and he said that we have been working on an elitist model of education and he said it was fine for 20% but if you’re going for 100% then you have to realise that 80% of people will have to work in agriculture and industry and technology.
We have done nothing for those 80% and that is why we have what is called ‘free education’. It is free but it is not education and at the end of it we have to give free employment so it’s a ridiculous system of giving jobs to graduates and I’m actually ashamed to say that even my colleagues in the present Government keep writing to me asking for jobs.
I’ve told Karu Jayasuriya to start issuing guidelines to Ministers to stop this. I don’t blame the Ministers, they are under such pressure that they go and politicise everything! This lot is doing it just like the last and I hope that all of you will push Jayasuriya to introduce a code of conduct for Ministers. His last lines to me on the topic were that ‘the culture is very difficult to change’ and my answer was that this is the first time that you have a Government that has been elected to change the culture. So please push for the code of conduct as quickly as possible.
Unfortunately under this absurd electoral system that we have, it’s the victory of the lowest common denominator. This whole country would be corrected if we change the electoral system and reduce the size of the cabinet to 25 which was what was pledged.
While I appreciate that there will be a National Government, I still think that you need to have a Cabinet of 25 because otherwise you will have all the deadwood and there’s no way of saying no to the deadwood because they are determined to render some sort of service to their families if not to the country. If you had a principle, it was much easier to say no. Having said that, I think it is vital to press for change in the electoral system and throw the responsibility back on parties. And I’m totally with Reverend Sobitha Thero when he says that we should not have an election until the electoral system is changed.
Pix by Upul Abayasekara