A short window with no room for short-sighted measures

By Patrick De Silva

Now that the wasteful business of the No Confidence Motion is behind us, the powers that be have a lot to achieve within the space of two years. The onus will fall on the Prime Minister to deliver upon the mandate received in 2015, with special emphasis on ensuring good governance, sustainable economic development, law and order, improving international relations and ‘public suffering alleviation’. 

The dream of a national government spearheading Sri Lanka towards unprecedented development is all but over, however politics does indeed make strange bedfellows, and whichever party or coalition that takes the helm must be steadfast, committed and sincere with its approach – lest it wishes to suffer indignity at the hands of voters come 2020. What the President does now is unpredictable, just as it will be unqualified and uninteresting. 

The science of ‘public suffering alleviation’ is a very Sri Lankan requirement given its large politically and economically immature voter base. Our public does not have the patience of our Southeast Asian counterparts; the winds of economic relief must be instant. Development for them can even be nothing but a pretty façade; stepping out of these lines spell death at the next election. The Prime Minister and his Minister of Finance must take note of these sensitivities and communicate with better detail on policy, something they have not been particularly strong with. The leadership must stay close to the pulse of the people on the ground, and not upset their fragile economic and social cycles.

The Government must become practical with its proposals for the people and even itself so that it does not shoot itself in the foot. The current proposal with respect to tobacco sales serves as a controversial but ample example where far better consideration is necessary. The proposals espouse to ban the sale of tobacco products 100 metres from schools, and to prohibit the sale of single cigarette sticks to customers. The Government needs to take into account the national economic cost of implementing such a move, plus, the impact to thousands of livelihoods, trade and consumer rights and even tourism. 

The tobacco trade in Sri Lanka constitutes of legally manufactured cigarettes and beedi, which is (wrongfully) considered a cottage industry. The Government earns on average Rs. 110 billion from the legal cigarette trade annually with 3.5 billion sticks produced. Ground reports point to over three billion beedi sticks produced annually, whereby in per capita terms every Sri Lankan consumes an average of 310 sticks during a year. 

Furthermore, over 200,000 persons are engaged by the tobacco trade islandwide, and 90% of sales happen in stick form as Sri Lankan cigarettes are the second most expensive in the world. If these draft proposals are implemented, State revenue from the tobacco trade will potentially slip below Rs. 50 billion, which will prove a costly miss to a Government in dire need of funds for investment.

The equation is fairly simple. The average day-wage earner earns Rs. 750 a day and is unable to buy an entire packet of cigarettes as this would cost him Rs. 1,000. Considering food costs, transportation, household expenditure, utilities and much more, a packet of cigarettes then acquires a state of luxury which he cannot afford. This customer now has no choice but to downgrade to beedi, which at Rs. 5 a stick becomes a very viable alternative at Rs. 100 a bundle. But there is no tax on beedi at the point of sale, thus, Government income is zero. 

Furthermore, consumers and tourists visiting the country will need to get their maps and measuring tapes out to figure where they can find outlets that are positioned 100 metres from a school to purchase their tobacco needs. Traders say that over 100,000 outlets would be impacted by this move. In this event, we may also need to consider allowing tourists to carry foreign tobacco products into the country to avoid embarrassment and inconvenience, and that would no doubt prove hard to police.

Besides the revenue concerns, the above situation raises a myriad of questions from a consumer point of view. If an adult consumer is making an informed decision to purchase a tobacco product, which is legally manufactured and sold in the country, is it fair to send him or her from pillar to post to obtain that product. The sale of tobacco products to anyone under 21 years is already banned in this country. Is it also fair then to issue licenses to manufacture tobacco products (there are over 500 beedi licenses issued) and then state you will be not allowed a fair place to market the product. Why not save the trouble, and ban tobacco entirely then?

In addition, the industry is a strong source of livelihood for thousands of farmers and traders, who have been involved with the business for over three generations. Retailers alongside farmers pointed out recently that such draconian regulations will impact their incomes up to Rs. 30,000 and more a month, and that neither the Government nor any other party has offered them a viable alternative. Tobacco is grown in most parts of Sri Lanka, and our leaf has been identified by the local manufacturer as of good quality. The Government would also do well to encourage growing for exports, which would yield much needed foreign incomes. 

The proposals made via institutions affiliated to the Ministry of Health suggest it would be welcome to endorse these prior to the arrival of a party from the World Health Organization this month. But the Government should take note that short-sighted measures such as these to appease vested parties and personalities will only serve to alienate and marginalise its own citizens and enterprises that contribute to the wider national economy in numerous forms. The economic cost of such a move would pose serious challenges to the Government, and non-smokers need not to be taxed further for the tax income lost from smokers due to bad decisions.

The vast majority of Sri Lankans live under difficult economic circumstances, and close to a decade since the end of the war we have still not succeeded in making a significant impact to their fortunes. We must be careful not to heap further difficulties on their shoulders and remove the small freedoms that provide them life and income. 

The Government led by the Prime Minister and his Cabinet needs to devise a careful but meaningful and sustainable economic action programme over the next two years that will appeal to investors and the public alike. Over the past three years, the leadership has communicated its policies effectively to the international community, but it has somewhat ignored the hearts and minds of the public. It cannot afford to continue in this vein. 

There must be a closer dialogue with all sections of the community and may heed to even its simple wants and desires, even though they may not complement the grand scheme of things on the global stage. Sri Lanka needs that. Congratulations are in order for the victory in Parliament this week, but there remains a great deal of soul searching and wok to be done. Time is running out on all fronts. Action! 

(The writer is an Attorney-at-Law and serves as a regulatory affairs consultant to leading agronomic institutions in Sri Lanka and Australia with over three decades of experience. He can be reached at [email protected].)