What did we learn about distant education during the lockdown?

Originally appeared on The Daily FT

By Dr. Sujata Gamage

With the sudden closure of schools on 12 March, the Sri Lankan education system plunged into a crisis. Overnight teachers had to gear themselves for on-line teaching and other methods of distance education. In contrast to higher education, distance education for school-age children is a new phenomenon.

The Government of Sri Lanka swiftly moved in to address the concerns of students preparing for Grade 5 Scholarship examination and Ordinary Level and Advanced level examinations, due to start from August, by telecasting lessons for those students. However, the schools were not at all prepared for a distance learning mode, and hence innovation became an urgent necessity to reach out to the full student population.

Further, COVID-19 is not going to be fully curtailed anytime soon. Even if schools start, we can expect sporadic disruptions due to new waves of the pandemic. Therefore, it is critical that we come up with short-term fixes as well as long-term solutions to the distance education of school children in the time of calamities.

Considering the need, the Education Forum Sri Lanka (EFSL) has initiated a series of virtual dialogues on ‘Distance Education in the time of Calamities and Beyond’ to identify good practices in distance education and make recommendations to policymakers. Twenty or more case studies gathered through a focus group of teachers and researchers and further contributions by the participants of our first dialogue revealed several issues.

More than 60% of households with school-age children have no internet

According to a comprehensive survey of mobile use in Sri Lanka by LIRNEasia, in 2018 only 34% of households in Sri Lanka with children aged five to 18 had an Internet connection. More than 90% of these connections are accessed through mobile networks using a smartphone. 

Of these households with internet access, an Online Realtime Classroom experience is enjoyed only by students attending a few select schools. This experience would be for about one to two hours per day, with a variety of self-learning educational materials supplementing the online experience. The percentage of children receiving such an online classroom experience seems negligible given that even some of the popular schools in Colombo have not been able to provide that kind of experience to their students.

Essentially, the primary mode of distance education for 34% of families with internet access is receiving notes or assignments over mobile apps like WhatsApp and Viber. For those families for whom the smartphone is the only device connected to the Internet, dedicating it to the use by one or more children, with or without adult supervision, is difficult. When large quantities of notes are sent, the situation becomes unmanageable. The other 60% remained unreached.

Notes and tutes sent over WhatsApp is not education

Parents cannot substitute for teachers. Even parents who are teachers find it difficult to teach your own child at home. Without adult guidance, notes and tutes do not make an education. Further, as parents are finding out, the problem is not technology.

The mode of education in Sri Lanka, where large quantities of facts are communicated to children in preparation for exams, is perhaps the biggest barrier to distance education. Students being used to spoon-feeding is also tied to this testing of facts through examinations.

Plan around the least privileged

The situation is not dire. Even those unconnected are not without resources. To quote Kagnarith Chea, a young social entrepreneur from Cambodia with whom I communicated recently:

“Distance education requires one of three things – Device (phone, tablet, computer, TV), Network (intranet or internet) and Content. In an ideal situation, all three should be available. In a no-choice situation where there is no internet, we can do without it. In fact, when we launched my educational programs through Edemy we did it without the internet. So long as there are devices and content, distance education is still possible. I believe that this is the best scenario for kids without access to the internet in the time of COVID-19. There are always limitations, but access with limitations is better than not having access at all.”

In Sri Lanka, textbooks are given free of charge for all subjects in Grade 6-11, making notes and tutes sent over WhatsApp somewhat redundant. Mail service is available for almost all homes. In a partial lockdown, VIP services can be arranged for school children. Broadcast TV and radio are other modes that are more widely available. As some tech experts have pointed out memory cards or micro-SD cards have a lot of potential for distributing content under no internet conditions. These limitations have their positive side too.

Benefits of a leaner and smarter education will accrue to all

Thinking of distance education under low resource conditions of the least privileged forces us to focus on parts of the curriculum which can be integrated and parts which need to be taught on their own, and ration content overall. If the content is less and students are guided to be self-directed, some of these non-internet solutions can in fact lead to a quality distance education. 

Although the lockdown may be eased, schools may not start for some time, and the necessity of communicating a leaner and smarter education to children without internet may benefit the education of all children irrespective of their level of access to technology. 

No-internet scenario with rationalised content

For example, if we decide that Math is a subject where children will suffer most if they get less schooling, the full focus during a pandemic-induced distance education can be on that subject while other subjects are integrated into a lesson plan where key concepts are threaded around one or more themes. 

For example, valuable contact time and content delivery mechanisms can be focused on teaching math. Since students already have textbooks, all additional content will be supplementary, providing entertaining ways for children to learn difficult to grasp concepts. 

DVDs could be prepared and provided ahead of time for families to play over their TVs. Micro-SD cards can be made available for each math lesson for each grade. Owning a smartphone to use supplementary learning materials is more likely than parents purchasing internet access for undefined content. 

Once school starts, home-based learning drills could include sessions where students try to learn on their own using supplementary materials while the teacher plays the role of a parent who is more involved in the logistical aspects. 

Now, how would one integrate other subjects around one or more themes in distance learning situations? For example, for Grade 16-9 there are 13 required subjects. If you take mathematics out, COVID-19 epidemic provided the best theme ever for bringing other subjects – language, science, history, geography, religion, aesthetics, citizenship, health and physical education practical and technological skills and IT subjects together. The average teacher would need help with theme-based teaching and teacher associations led by veteran teachers could lead the way by developing and sharing lesson plans. 

Overnight, we could go where Finland has reached after years of providing world-class education in a traditional mode. Finland recently announced they will not divide school time into subjects anymore and students will learn key concepts of several subjects woven together around selected themes. If in Sri Lanka we are forced by necessity to limit content through the integration of subjects around a theme, when our children return to school, they may want such education to continue.

But internet access for all should not be far away

Sri Lanka and most developing countries have come a long way from a situation where owning a phone was a luxury to where, for example in Sri Lanka, 97% of households have access to a mobile phone. However, access to the internet is available for less than 50% of households in Sri Lanka. 

If parents see the benefits of their children learning to learn using supplementary content and note that children with better access to the internet have more and better content, those parents will go the extra mile to secure internet access for their children.

According to the 2016 Household Income and Expenditure Survey of Sri Lanka, parents in Sri Lanka already spend 50% of their education expenditure on tuition. If the need for tuition is reduced through a fewer number of examinations to be faced by children and students are required to learn on their own supplementing textbooks with e-content, it could well be that education will be the driver of digitalisation of Sri Lanka.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Food security and self sufficiency

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

Food supply chains are strained or broken, domestically as well as internationally. It is natural and necessary in such circumstances to think about food security. But it is important to think intelligently and in ways informed by evidence.

All rankings and indexes have flaws, either in the data that form their basis or in their design. But they provide a useful starting point for an evidence-based discussion. The Global Food Security Index comprises three components: affordability, availability, and quality and safety. A new component on natural resources and resilience was added in 2019. 

The fact that Singapore, a city-state with over 5 million people and no access to farmland and therefore to locally grown produce, is ranked first in the baseline index signals that this index is based on an approach to food security that goes beyond common sense. Singapore drops 11 places when natural resources and resiliency are accounted for. It is vulnerable to sea level rises, ocean eutrophication and food import dependency. But even in 11th place, it performs better than all South Asian countries.

I have been studying critical infrastructures for more than twenty years. Sri Lanka’s accession to the Tampere Convention on the Provision of Telecommunication Resources for Disaster Mitigation and Relief Operations and preparations for the Y2K problem were the immediate reasons. We have also been studying agricultural supply chains for over a decade.

Resilience-cost trade-off

There is always a trade-off between resilience and cost. If cost is of no concern, one can have extraordinary resilience, with 100% redundant facilities further backed up. Sometimes when the stakes are very high and the environment highly risky, one does have multiple back-ups. For example, in the worst days of the war when the LTTE was attacking Colombo and CEB engineers were striking at the drop of a hat, I was told about battery backup for mobile base stations, that were further backed up by diesel generators. But all this costs money.

It is the same with food security. One may believe that relying on locally produced potatoes reduces risks. But it is well known that the local production costs of potatoes are significantly higher than that of imported potatoes. Domestic producers are kept afloat by slapping special commodity levies on imported potatoes. What this means is that domestic consumers are paying more for inefficiently produced local potatoes and paying indirect taxes to the government for the imported potatoes they consume. 

Protectionist duties add up, making food more expensive for all. As a result, the cost of labour is higher in Sri Lanka. Therefore, many industries that must compete globally are hobbled by high labour costs.

Sourcing from inefficient domestic producers does not necessarily reduce risk. Agriculture is inherently risky. Floods, drought, insects, and disease can devastate crops. Truly resilient supply chains would not rely on a single area (such as Welimada for potatoes), or even a single country. In the same way that one would not be totally dependent on, say, Viet Nam, for all the rice the country needs, it may not be a good idea to think of self-sufficiency in rice as an absolute policy objective. 

In the face of COVID-19 and disruptions in global supply chains, Viet Nam has imposed some limits on rice exports which would give legitimate cause for concern among its customers. But on the other hand, relying totally on local production is also risky, as was seen in 2016-17 when drought reduced production to 1,474 MT from 2,903 MT in 2015-16. 

So, the real answer for food security is not the simplistic striving for self-sufficiency, but the balancing of cost and risk management through diversifying sources and ensuring that supply chains are robust. Preventing the emergence of monopolies that control choke points is an important part of the response. It is these complex trade-offs and balances that the Global Food Security Index attempts to capture through the weighted combination of 34 different indicators.

Sri Lanka’s food security assessed 

Sri Lanka was ranked 66th out of 113 countries in 2019. It was scored high in nutritional standards, change in average food costs, the proportion of population under global poverty line, food safety, food loss, urban absorption capacity, the volatility of agricultural production, and access to financing for farmers. Its score was pulled down by factors such as public expenditure on agricultural R&D, per capita GDP based on purchasing power parity, protein quality and political stability (biggest decline between 2018 and 2019). 

Sri Lanka’s overall score was slightly below the average, and quite a bit lower on quality and safety. It was ahead of its peers in South Asia, but behind peers such as Indonesia and the Philippines in South East Asia. India was ranked 72nd, with Pakistan (78th) and Nepal (79th) even lower. As usual, Sri Lanka was not too bad but could be much better.

When the natural resources and resiliency is added to the mix, Sri Lanka falls back one place to 67th out of 113. The impact of resilience associated factors is greater in some countries. For example, Australia and New Zealand show wide swings. Australia, which is 12th in the baseline index, drops to 16th place when natural resources and resilience are factored in, whereas New Zealand overtakes Australia by advancing five places to 14th place.

Resilience that is sensitive to cost

The response to COVID-19 and the resultant damage caused to food supply chains calls for a thorough re-examination of the entire agricultural system. The fragility of the current system has been laid bare. But the response should be nuanced and based on a sober consideration of evidence, giving due regard to the need for value for money in food. Instead of prohibiting imports and imposing taxes on consumers to protect inefficient producers, the state should ensure that supply chains are resilient because they are diversified both domestically and internationally. The best way to do this is by preventing the monopolisation of links in supply chains. 

Simplistic retreat to slogans such as self-sufficiency will not suffice. Sri Lanka has experience with those policies from the 1970s. Then they gave rise to black markets for the affluent and malnutrition for the poor. What was implemented in a much simpler time cannot be made to work in today’s more complex economy where consumer preferences cannot be satisfied by ration shops. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Price controls don’t work and I told you so

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

A story my biology teacher taught me when I was a schoolboy is even in the present day a formidable anecdote in the grey area of public policy and economic management. Once upon a time, deer and lions were living in the same forest. The then king was very fond of deer and felt that deer are treated unfairly as they often become prey to a marauding pride of merciless lions. The king ordered his guards to destroy all lions in the jungle. After a few months, the deer population grew rapidly and the king was very happy. A few more months later, the deer population grew exponentially and the food sources in the forest were not adequate for their consumption and they, in desperation, resorted to eating the barks of trees. This resulted in the death of the forest, which ultimately extended to the deer. Soon, there were neither deer nor a forest. The entire ecosystem had collapsed because of one single intervention. 

The public and economic policy have similar dimensions and that is why we should not intervene in markets but allow free exchange, as there could be a chain of unintended consequences, even though the initial intention was good. In the current global economic landscape interdependencies of two or more cogs in the global market make the wheel turn, and the time it takes from action to reaction could be a mere few seconds or just days. A good recent example is the price controls imposed by the Government on tinned fish and dhal which were revoked recently. The Government’s decision to revoke the price controls is commendable, but the damage to the market is done, at least for the moment. 

Markets are not limited to the supply and demand of goods and services so they have a mechanism to reach an optimal price and quality. It’s more than that. It is important that market sentiments are kept consistent so as to ensure the key wheels of the economy – investors, buyers, and sellers – keep turning as efficiently as possible. If this takes place, consumers, that is you and I, get the best products and services at the best price, without being prey to black-market racketeers. 

The domino effect

The Advocata Institute, and this column, highlighted why price controls are impractical and how they lead to the creation of black markets and shortages of food for people. Sri Lanka imports 90% of its tinned fish and has a 35% tariff on imported tinned fish. When the marked/market price is Rs. 225, but the legally allowed selling price is only Rs. 100, the obvious reaction of importers would be to stop importing tinned fish. It’s not the prerogative of a business to knowingly sell at a loss, regulated or not. 

Price controls during a pandemic like Covid-19 look insignificant, but it is not. The stories of the adverse effects of price controls haven’t been spoken about and the connection in this hullabaloo is not visible. It has had the most impact on the poor and vulnerable community in society who do not have a voice. Tinned fish was probably their most affordable source of protein, but instead had to shift to more expensive sources which is beyond their affordability, and in most cases, I’m sure that they stayed with empty bellies due to the unavailability of affordable and nutritious food.  

This has also resulted in the President having to sacrifice his political capital as a significant priority was given to price controls during his address to the nation, and now the decision has been revoked. Price controls in Sri Lanka are not a new phenomenon. Every government has imposed price controls and these have constantly and comprehensively failed, but are continually included in the political theatre to mislead the taxpayer. It is unfortunate that the taxpayers too continue to swallow the same trick, regardless of their past experiences. 

Price controls are not limited to tinned fish and dhal. There are price controls still in place for essential goods such as rice, milk powder, turmeric powder, big onions, and maize. The results from this will not be different from what we experienced with tinned fish and dhal. Not only food essentials, but LP gas and cement also have price controls. In the leisure sector, hotels have a minimum room rate. Our petroleum products (diesel, petrol, and kerosene for example) and bus fares have price controls.   

Price controls, more so than regulation and lack of competitiveness, are sure ways of stagnating any market or industry. Without going into detail, if you observe sectors like public transport, it is evident how the combination of price controls, lack of competitiveness, and overregulation has led to a terrible public service for the taxpayers.

Backward Sri Lanka

Although the world has moved from travelling from Earth to space over the last five decades, the brand of the buses, train compartments, and their service condition have remained the same during the same period in Sri Lanka. The reason is simple. Trains are a complete government monopoly and there is no competitiveness at all; no one can enter that market. As a result, the trains are late, always on strike, and overcrowded. The route permit for a bus is more expensive than the bus itself for most of the routes and is heavily politicised. 

Market entry is extremely difficult and prices are controlled. As a result, buses are always slow with very poor safety precautions. Passenger service is unimaginably terrible as a result of the absence of choice for people to shift to alternatives. Simply, bus owners have no incentive to provide a better service. Making things worse, private vehicular traffic to the city is increasing alarmingly, combusting more hydrocarbons and impacting the environment. As a side effect, we spend billions of dollars on importing fuel to burn on bumper-to-bumper traffic. This is just a single example of the disastrous combination of price controls, lack of competitiveness, and overregulation. 

The other two main macro decisions by the Government this column has highlighted are most likely to cause further unintended consequences with the gradual opening up of the Western Province from tomorrow (11) onwards.

1. Imposing import controls will have an impact on local industries and employment, along with shortages of essential items for consumption, and cause supply-side shocks and create inflation. 

2. Money creation (quantitative easing or money printing) will further depreciate our currency in the long run and create an artificial demand for imports. Already our rating has been downgraded by Fitch.  

Enhance competition

We need to realise that not making a bad decision is equal to making a good decision. Rather than controlling prices, we need to enhance competition with the gradual opening up of the economy, and not waste time during this crisis, without easing regulatory barriers such as price controls and opening up for regulation that is both consistent and transparent. Institutes like the Consumer Affairs Authority’s mandate need to be revisited and they should lead the promotion of competition instead of becoming the neighbourhood cop for price controls. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Review of Prof. Razeen Sally's 'Return to Sri Lanka – Travels in a Paradoxical Island'

By Riyad Riffai.

Digging into the first few pages into the book, Return to Sri Lanka – Travels in a Paradoxical Island, shattered my expectations of an academic piece on the post-colonial Sri Lankan economy. When Razeen said his book was coming out, this is what I expected, what we all expected. But it was a fallacy, what we got was a very personal journey to the unknown bits of a very serious and well known academic, Razeen Sally's life in Ceylon and later Sri Lanka.

In his book, Prof. Razeen Sally writes an extremely powerful story of his recollection of growing up as a schoolboy in the mid-sixties, of challenges faced by a young Welsh mother and her Sri Lankan Muslim husband to raise three young boys, to his unexpected return to the land of his birth. The book narrates the writers' personal experience, on how the model colony had transformed from its utopian state to post-independence epilepsy in less than two decades later, fueled by ideology, supremacy, insecurity and above all the lack of opportunity.

The book gives a fresh perspective to the mysterious past of the four corners and the bits in-between of the island. Razeen has taken great care to write much of the book on personal experience and as a career academic to careful research to add the bits and pieces of history not sparring the inconvenient truth which is customarily left in the hands of the chosen to edit.

At the end of the book, one gets the feeling the writer is demanding for change, serious change if passed we'll be still clambering to escape from Bane's Pit for the next 70 years. Quoting from one of the best books ever written, "It was the best of times and the worst of times" by Charles Dickens' historical novel, A Tale of Two Cities. Absolutely, it is the best of times for a few and worst of times for many. This is the key message for me that the writer refers repeatedly. Unfortunately, for the past seven decades, Sri Lanka seems muddled in the latter as well as the foreseeable future.

This is Prof. Razeen Sally's first shot at writing a book that is nonacademic, of nothing on macroeconomics, trade or commercial policy that he's been churning out from his days at the LSE and now at the NUS. He's done one pukka job. Full stop.

Economic implications of COVID-19

Originally appeared on The Daily FT

By Dr. Sarath Rajapatirana

There is little doubt that COVID-19 will have a substantial economic impact on the Sri Lankan economy. This impact will include direct reduction in output due to the loss of working days and the necessary social distancing to prevent the spread of the virus, medical expenses to deal with persons who have been infected and expenses to prevent greater infections of those who are both vulnerable and not prepared to follow the instructions with respect to the necessary social distancing.

While there will be an immediate effect on incomes, there will be medium and long term effects following from policies used to prevent the spread of the virus. Where the rate of infections is concerned, so far, we have done well. The issue is whether we can maintain the preventative system that has been put in place with the deployment of large number of police and armed forces personnel. 

This shock to the economy is larger and perhaps deeper than those we have encountered with the Global Financial Crisis (2008-2012). There was a limited effect of that crisis since our main exports markets USA, UK and the European Union experienced reductions in their GDP growth rates. The Easter Sunday bombings had a strong impact on our tourism industry from which we had not fully recovered when COVID-19 19 struck. But effect was relatively small and confined to one sector. 

The initial conditions

When COVID-19 struck we were already in an economically weak position. Our GDP growth rate was 2.6% in the first half of 2019 with the impact of COVID-19, a recovery to our average growth rate (average for three decades of 4%) will be difficult to be achieved in the coming three to five years without substantial reforms and large inflows, particularly FDI.

Earnings from tourism are substantially low after the 2018 Easter Sunday bombings. The immediate future for tourism does not look good. Our exports have not risen enough to help with the current account in the balance of payments. Meanwhile, our foreign exchange reserves have remained low at around $ 7.0 billion including a part of borrowed funds. Finally, we have to meet large debt repayments around $ 16 .0 billion in the coming four years 2020-2023.

The economic impact of COVID-19

We can expect a substantial economic impact of the spread of the virus, both directly and indirectly, the latter being more important than the former. Direct impact given is that to date labour is in virtual quarantine. Measures to prevent the spread of the virus will cost funds that have not been budgeted before. And, the relief measures will cost more. 

There needs to be a special allocation of funds for them. Looking at the experience of other countries these infections will increase but if we follow proper protocols our infections will remain low, particularly through social distancing. We can mitigate their impact by proper procedures to provide access to medical services for prevention and treatment. Greater testing and relying on trained epidemiologists would help. 

The direct cost of the virus on the economy arises from the reduction in output given that production in all the sectors has virtually come to a full stop, only to increase in areas where the curfew has been withdrawn. But most workers are from the highly populous three areas of Colombo, Gampaha and Kalutara and are still in their homes. 

In terms of national income – wages, profits and interest incomes will remain low in the near term. This makes for much-needed policies for recovery. While we deal with the emergency, we have to think beyond the near term for proper policies. Measures taken for this emergency situation will have effects on the medium term and long term.

Government programs to mitigate impact of COVID-19

The Government has proposed a full list of relief measures. These include: 

• Grace periods for the payment of income tax. And VAT, for driving licence renewals, paying water bills, and assessment of taxes less than Rs. 15,000, monthly credit card bills of less than 50,000 given and extension of until 30 April. 

• Suspend leasing loan payments of three-wheelers for six months. 

• No recovery of loan payments from Government and private sector employees until 30 May.

• Suspension of repayments of personal loans less than Rs. 1 million.

• Rs. 20,000 allowance to be paid to graduates chosen to follow training.

• Agrahara insurance benefits for health workers involved in prevention activities and civil security personnel are to be doubled.

• Six-month debt moratorium to be granted to tourism and apparel SMEs.

• Bank of Ceylon, People’s Bank, National Saving Bank, EPF and Employees Trust Fund are to jointly invest in Treasury bills and bonds to stabilise money market at 7% interest rate. 

It is noteworthy that none of these measures are based on the price system. Most are based on directions, orders and quantitative measures.

Additional measures to provide relief include 

• Maximum of 15% interest rate on credit card domestic transactions up to Rs. 50,000 and a 50% reduction in minimum monthly charges.

• All bank branches are to remain open during non-curfew hours.

• Ports, Customs and other regulatory bodies to issue essential food, fertiliser, pharmaceuticals and fuel to relevant individual continuously.

• Samurdhi beneficiaries and Samurdhi cardholders be offered interest-free advances or Rs. 10,000 through Samurdhi Banks. 

• Samurdhi Authority to issue title certificates to low-income families immediately to issue nutritious food items. 

• Exempting Sathosa and Cooperative Store from VAT and other taxes. 

• A special account opened at BOC at the Presidential Fund to provide relief to health and social care. Rs. 100 million allocated. Provide rice, dhal and salt on a weekly basis. Tax and foreign exchange restrictions waived for domestic and foreign donors to contribute to the fund.

Despite all these measures, it is difficult to deliver economic relief to the poor and particularly the unemployed and self-employed. This because Samurdhi is not properly targeted. Some persons who deserve help have no access to these income transfers while others with high income get Samurdhi funds. The issue needs to be addressed in our future programs to help the deserving poor. 

Other countries like Chile have such a system of income transfers based on detailed family and income data. A recent initiative by our Government to provide ration cards to those who are very poor and not recipients of Samurdhi will be helpful. But in the medium to long term, we need to reform the Samurdhi programme and target benefits to the deserving. 

Meanwhile, the CBSL introducing import controls through credit restrictions which will create medium and long term distortions in the economy and lead to higher inflation. With these policies, it signals a greater reliance on quantitative measures rather than use prices to manage the economy including a competitive exchange rate. When the price system is not used the quantities have to be allocated by an authority or a “czar” that breeds irrational allocations and corruption. 

Conclusions

The measures proposed by the President are appropriate to address the short-run situation created by COVID-19, especially on the consumption side. But complete shut-downs such as the closing of the private pharmacies is counterproductive to the maintenance of health standards of those who need daily doses of medicine like those who have diabetes, chronic heart disease and asthma. It was found feasible to relax control such as allowing private pharmacies to open.

However, since we are starting from already weak initial conditions, the task is not easy. And, carries the danger of over-playing the hand of controlling the economy and extending the role of the Government in the economy. And, at times underplaying it, given that implementation of relief measure including income transfers depend heavily on the public service. It is not known to act efficiently and quickly. 

Overplaying the hand of the Government carries with it the danger of bestowing additional and permanent power to the Government. We have seen the results of that experiment in the 1970-1977 period, with income ceilings, near 100% import controls restrictions on the transport of paddy. This overplaying of the hand of the Government led to disastrous results during that period. GDP growth rate fell, as did employment followed by a sharp reduction in living standards.

CBSL would do well to avoid direct quantitative measures to influence the volume of credit. It will reduce the flexibility of the economy to deal with the COVID-19 shock and signal its preference for quantitative measures including the management of reserves specially avoiding flexible and competitive exchange rates. 

Direct measures could lead to a non-competitive economy, especially harmful for our export growth. Banning imports directly will create a bias against exports. We have to depend on incentive reforms to raise our GDP growth rate by raising the productivity of the economy. What has been done in the short run may be necessary. But not it is not sufficient to ensure medium and long term growth. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

What economics can teach Sri Lanka about PCR testing

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

Beginning with our education system, when a student successfully completes their Ordinary Level they are segregated into Commerce, Arts and the ones with the best results choose Maths or BioScience. A completely new direction from the humble times of the O/L. A student at the end of their studies in their chosen field can become a great medical practitioner, a legal profession, or even an engineer. But during their time at university or as a matter of fact in school their basic knowledge in economics, such as what drives inflation, interest rates, why am I getting less dollars than last year at the money changer, is at the mercy of a silver tongue politician, a master of selling excuses. The excuses which are hastily gulped by you, the ordinary citizen. The current economic situation created by Covid-19 is a sterling example of this disconnect. Many well-educated citizens who haven’t studied rudimentary economics during their learning years join the workforce in obedience. What you don’t know won’t hurt you. Sometimes even those who studied economics have forgotten that ‘Economics’ is the social science of production, distribution, and consumption of goods and services. We all often miss the common sense that we have to make a continuous effort on making our choices with limited resources available and organise and coordinate to achieve maximum output by increasing productivity. Ultimately economics is about you. In this case “ability to test” at present is our limited and most scarce resource. How we utilise it to the greatest effect is probably the decision-maker on how fast we can overcome and how to minimise its impact on the wallet of each Sri Lankan. Undoubtedly “testing” in isolation will not work without the policies of social distancing and medical policy management. Economics, medicine, bioscience, technology or anything is no longer isolated. There is always an economic angle. We have to find the winning formula to come out of COVID-19.

Economics of testing strategy

The countries who faced the pandemic successfully have one thing in common. Their testing strategy and coordination between policies has been incredible. New-Zealand, Vietnam, South Korea, Taiwan the unsung hero and even China have given absolute priority to testing. Ability to test has been discussed on various platforms in Sri Lanka. But still, the public seems to run on an attitude “This shall be passed”. Some tend to think opening up is the end of this battle, without weighing the pros and cons to the economy. Let’s face the grim reality we are not a rich country and the world doesn't want our currency, hence running the press in perpetuity is not a solution, it’s the opposite of it. Hence, the only viable economic option is to be at the helm of the new normal and “testing” will determine the shape of the new normal.  Sri Lanka did a commendable job in combating the wave 1. (Wave 1 is infected cases directly from China). We had a very successful quarantine process and all index cases (cases, where the person got infected, is traceable) at the beginning was identified and did not provide any space to progress onto community transmission (infected cases from small clusters of the population). In contrast, some developed countries like Italy and the USA were hit immediately with community transmission right from wave 1.

However, Sri Lanka has seen a sudden uptick in cases as a result of coordination issues between our social distancing policy and a few vital loopholes in our testing policy. At the beginning, the testing capacity was about 100 and to increase that limit to 1,000 we took a considerable amount of time. Testing even at this juncture is a limited resource, so we have to maximise the productivity on testing. We have to maximise resources to increase testing capacity, while also ensuring that we test the right samples while overall testing numbers are increased. That is where exactly we slipped (Advocata highlighted the loophole in the testing policy)

Source: https://www.worldometers.info/coronavirus/ (Accessed on 1st of May 2020)

Basic visual diagram to understand the initial testing strategy by the author

We took a fairly long time to increase the testing as it is yet not up to a reasonable level. We did not utilise the private sector from the get-go, even though it has critical capacity for lab tests in the island. Additional lapses in testing the forces who are a high-risk segment (as they manage the isolation on the frontlines) caused a sudden increase in infections. According to medical experts’ opinion COVID-19, some infected cases indicate symptoms (symptomatic cases) while there are many cases that don't indicate symptoms (asymptotic cases). However, they both are the carriers of the virus. On our testing strategy, since testing capacity is limited, we have to provide priority for individuals who are symptomatic and who have been contacted with a previously identified patient. In economics, we had the opportunity cost of not testing asymptomatic cases at the beginning. It is not that simple; there are some high-risk groups who arrived from overseas and some asymptomatic cases in quarantine centres. So maximising the limited resource “testing” became very complicated. We did not expect a member in the triforce to get infected and the possibility of their high-frequency commuting carrying the virus across domestic borders. Some of them having gone on leave to take a break after the yeoman service they delivered have now become part of the problem by increasing the probability of more cases in low-risk areas. Countries like Vietnam identified this loophole early and they conducted frequent tests among high-risk groups. Drivers, cleaning staff at hospitals and often committing all individuals all fall into high-risk categories.

Economics on increasing testing capacity

One main delay to increase the testing capacity was lack of engaging the private sector on testing at the beginning of the pandemic. Private sector labs are mainly run by major hospital groups that are well regulated by the Ministry of Health and have the critical capacity to get the numbers in. A PCR test is a confirmatory test (Symptoms have to be indicated and a doctor has to recommend the test) and an individual cannot get it as a screening test (a test to identify an infection/ disease). As a result, private hospitals can only conduct PCR tests for the in-house admitted patients only. Of course, the cost of the private sector tests will be higher but by restricting private sector to conduct the tests as a laboratory test and imposing price controls on the tests is a sure way of discouraging the ability to increase the testing capacity from volunteer testing. The outcome would be someone who could afford a test at a higher price will now utilise the state health apparatus, adding further strain on limited resources. At the same time price controls will discourage the private sector to invest and further expand testing capacity. In an ideal case scenario, the private sector has to be encouraged to conduct the tests out of hospital premises to reduce the degree of transmission of the disease. 

Given community infections being reported we can’t adhere to our previous testing priority strategy as now the asymptotic cases have been reported and the opportunity of voluntary testing has to be opened up. The cost of an economy that is idle is not bearable for a developing country like Sri Lanka.

Solution

The only solution lies in improving our testing strategy and increasing capacity. There were some locally made PCR tests reported which is commendable and we should encourage them to upscale it to a commercial level. However, introducing a commercial scale medical equipment takes time as the process needs extensive testing is needed for approvals to ensure accuracy and reliability of the tests. Increasing testing by using basic economics on what is available and more feasible. Having fewer regulations on the private sector on testing, while we maintain free testing conducted by the government is the first most economically feasible option. Engaging the private sector will save an opportunity cost of testing more cases in the government healthcare for people who can’t afford it. As community infections have been reported now voluntary testing ability is a must. Only the private sector is likely to bring the investment for advanced and convenient testing like drive through tests, and mass-scale testing needed for industry. To coexist with Covid-19 till the boffins at labs to come up with a vaccine is still in the distant horizon, hence increasing tests is the only way out to defeat the invisible enemy at the moment. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Curtailing liberty

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

Imagine a day in the life of a daily wage earner, before COVID-19. Of a woman who makes her living by providing cleaning services to several houses in Colombo.

She was free to take public transport, and on occasion a three-wheeler to get to work. She was free to take up or decline work and negotiate rates and days. She was free to keep cash, put some money in a bank and withdraw when needed. She could choose the vendors from whom she purchased groceries and other items.

It was no walk in the park. The work was hard, the madams were not always nice, the buses crowded… But she was able to feed her family and live her life. She could make small donations and participate in a seettu. She was not dependent on handouts or charity. She had liberty.

Now imagine her post-COVID-19 life. The money has run out, the jewellery is in the pawnshop. She cannot work, she cannot earn. April is burning hot, and her family is cooped up in a tiny tenement. Even when she has money, she cannot choose: she must buy whatever is offered at whatever price by whoever comes down the lane. She has to rely on handouts from the Government and from others. It used to be like this after the floods, but then one knew the water would recede and normalcy would return.

The curfew was supposed to be just for the weekend when first imposed. Now it has been over a month. Dates are announced and then changed for reasons unexplained. No one knows when this will end. Will she be welcome in the houses she used to clean? Will they fear her as a carrier of the disease and do their own cleaning? Will there be other work? She sees the streets are still being swept. Who should she talk to, how much is the bribe?

This is what the loss of liberty is for daily wage earners, for those whose work requires co-presence, those most affected by the curfew. The freedom to earn a living, to traverse public thoroughfares, to choose from whom to buy and what, to have some peace with the children out playing. All taken away by distant politicians and officials whose earnings are certain, who have no worries about food on the table when they are driven home by a chauffeur after a drink at the Hilton with a friend.

Let us concede that the lockdown (or its more severe version, the curfew) was needed to prevent the health system from being overwhelmed.

To save the lives of the elderly and those with weakened immunity. To buy time to get the tests and the acute-care beds and the PPE [personal protective equipment] organised.

The curfew was State action with significant positive externalities for society. Everyone benefited, including the daily wagers and the politicians. But the costs were not borne evenly. Those with the curfew passes and the Government vehicles may have borne none. Those among them who exercised discretionary authority may have even benefited.

The child who could not celebrate a birthday bore some of the costs. The executive who could not maintain the jet-black head of hair did too. But their costs were nothing compared to the daily wager cooped up in a tiny tenement without money to buy food and no certainty about what next week and next month would bring.

Giving these people money is not charity. It is compensation for the harm done to them by the State that dwarfed the benefits they received. It has been common practice to provide compensation when the State takes away assets or livelihoods. That is what has been done by the curfew.

When the State acts in ways that result in life-changing impacts on citizens (the curfew in this instance, but could also be allowing infected individuals to clear the airport), there must be accountability. There must be evidence that decisions were taken on the best available information and with best efforts made to minimise harms to citizens.

For this, two things are needed. The decisions must be taken under some written law and must be documented. There must be independent entities such as the Courts and the Legislature in place to examine the way the decisions were taken and with the power to hold the Executive to account. Do these conditions exist now?

The Acting IGP makes all sorts of announcements and arrests are made. But what laws are being broken by persons using public roads? What laws made by our elected representatives require shops to be closed?

Who decides what is essential and what is not? On what basis? Where are the emergency regulations? There can be no emergency regulations when an emergency has not been declared. There is no Parliament where questions can be raised, and the Courts are not fully functional.

A week of improvisation can be understood and forgiven. But now it’s more than a month. It is time to abide by the Constitution that all elected officials have solemnly committed to uphold. Perhaps we should consider requiring the unelected decision-makers to also take an oath of office, so they are reminded we live under law.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Let’s not look too far ahead

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

In cricket, most great batsmen will tell you that they don’t go out to bat thinking “I will score a century today”. They break their innings down to phases; “let’s score 10 runs”, “let’s score 20 runs”, “let’s survive the next four overs”, etc. Basically, “let’s face the next ball”. While this may be misconstrued as a lack of ambition, the underlying principle is that when you look too far ahead you can lose sight of the here and now. In cricket, this could mean getting out for zero while your mind is on the 100. Covid-19, the virus that found its origins in China, not only has Sri Lanka locked in its megalodon jaws but the entire world as well. While this too shall pass, we have to admit that we are well and truly in an unprecedented crisis. We will not be safe until the world is safe and that is the reality. Having faith that things will be back to normal soon is good but our actions should go beyond simply being optimistic and hopeful. Without beating around the bush, let’s be realistic and pragmatic by being scientific. In the past, we have relied on soothsayers who appear on television, devil dancers, turmeric (good luck finding turmeric, now that there’s a price control), and our love of bashing coconuts. The fact is that until we see the production of a vaccine or an acceptable solution, the entire human race is sailing in the eye of the corona storm. Many corporate dons and government officials in Sri Lanka have been pitching in with their business plans and strategies on what can be done “post-COVID”. Sri Lanka has faced the pandemic reasonably well compared to a few of the other countries, but in a crisis of this magnitude, in a closely connected world, the impact of a neighboring nation’s mishandling of the crisis can serve as a cautionary tale for the rest of the world. There is no point in early celebrations for doing well or having anxiety about those who may have mishandled the crisis, as we all are at square one and need to overcome this together. Sentiments on anti-globalisation and going back to the fallacy of “self-sufficiency” is not the solution as we failed that experiment comprehensively almost five decades ago. In a crisis of this scale, all predictions made will fall apart in a matter of not months but days. Take Sri Lanka as an example. We had all planned to open up the Western Province on 22 April but reported cases increased rapidly just two days before. How do we plan in an unpredictable crisis and what should we do is the question that has to be answered sensibly.

Historical examples may have limited relevance

As with managing any crisis, we generally make our decisions based on historic perspectives we have and connect with learnings from peers. First, we have to realise Covid-19 is an unprecedented scenario and how we managed previous crises will hardly help us to overcome the current battle. The strategies that worked for us in overcoming the Boxing Day Tsunami, fighting the brutal civil war against the LTTE, and overcoming the Easter Sunday bombings last year may not work in this battle against Covid-19. We are in a situation where every contract/agreement signed at every level has been challenged. It starts from a simple violation of a rent agreement, by not being able to pay the house rent on time, to a national-level crisis where we lack adequate foreign currency to pay our foreign debt commitments. Having seen the negative side, the reality is there will be a multitude of opportunities which will open up once the storm dies down. The challenge is the inability to predict the opportunities or the shortfalls. So when managing and strategising for the long term, a “one size fits all solutions” plan is very futile at this juncture. However, it doesn’t mean that we need to take a comfortable seat or take a “do nothing and wait” stance. Our game plan has to be pragmatic and dynamic. A game plan can be pragmatic if we have our basic fundamentals right. Predicting opportunities and developing strategies for a crisis without having the “basics” is similar to trying to solve an integration and differentiation mathematical question without having the basic knowledge of addition, subtraction, and multiplication functions. In a recent conversation with Advocata, Export Development Board Chairperson Prabash Subasinghe said it well: “This is a marathon, not a race.” At this point of time, it is of paramount importance that we have a strategy to float for the next 12-18 months and we have to play it dynamically and sail based on the direction of the wind. For the economy to stay afloat, we have to negotiate with the International Monetary Fund (IMF) for a balance of payment (BOP) bailout programme and request them to provide financial assistance to keep us afloat in the coming months. At the same time, we need to use our foreign office and actively seek bilateral loan facilities to manage the crisis. Import controls, liquidity injections, the Government taking over food distribution, and price controls are not at all advisable actions and they won’t help us to keep the rupee afloat, versus the dollar. Rather we will lose our dynamism and pragmatism and crush even the little credibility we have on markets.

The status of our basics

The next question is what can we do and what should we do to get beyond the floating stage. We have to evaluate the status of the basics and spend time on getting our basics right at this dark and stormy hour. Our fundamentals for sound economic policy have never been right in the last three to four decades. We should not lose the benefits of bringing hard reforms and getting the fundamentals right while we fight this crisis. For example, when pay cuts and job losses take place post opening up, people will actively look at part-time opportunities and work more to earn an income. At that point, if our business registration takes three months and if getting an online payment platform takes months for an e-commerce business to take off, the million opportunities created due to Covid-19 will be taken away by our neighbouring competitors. A study done by the Advocata Institute has found that registering a sole proprietorship is far more difficult than incorporating a private limited company. If we fail to fix that level of basic reforms (which can be easily fixed) we will not have any space to capitalise on the opportunities even if we get the support from development agencies over the next few months. Convoluted and complicated customs procedures and red tape have been discussed for years. South Asia Gateway Terminals (Pvt.) Ltd. (SAGT) CEO Romesh David, at a recent online forum on Sri Lanka’s exports economy with Advocata, said that even in the context of Covid-19, goods can cross borders and systems can be automated. If we are not ready to fix these basic regulatory barriers at Sri Lanka Customs, even our revised export target will be just an imaginary number. In summary, our strategy from a national level to that of a small business has to encompass the ability to float pragmatically as we are still in the eye of the storm. At the same time, we have to make sure to utilise our energy on getting our basics in economics right if we are to capitalise on the opportunities that will unfold when the storm is over. In difficult times people will be open to hard reforms and governments can spend political capital on getting hard reforms done. The Government should move back to their role as a facilitator rather than trying to become an active player and throw long-term strategies during one of the most serious crises in the history of mankind.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Polling amid a pandemic while preserving rule of law

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

As I let the contending views on how and when the General Election should be held wash over me, I am comforted by the fact that most participants in the conversation cite provisions from the Constitution. Those arguing that the Constitution is silent on the specific question before us, including the Elections Commission, want the Supreme Court to give a solution. In all, good signs that constitutionalism has not been abandoned. Constitutionalism is respect for words on paper that say what power holders can and cannot do; it is basically about the widespread respect for law; it is at the core of rule of law. In an essay I wrote just before the 2010 Presidential Election and then twice in 2015, just before the Presidential Election and then in a reflection on the Election and the subsequent 19th Amendment, I described the Sri Lankan polity as being torn between the default Kandyan feudal mindset and Constitutionalism. In 2010 we went one way and in 2015 the other way. Where will we end up in 2020?

Ending the impasse
The references to Articles of the Constitution by proponents of holding elections before the country returns to normalcy is obviously a good thing. It indicates that they place weight on what the Constitution says various entities can and cannot do. One hopes that the independent Election Commission will be able to navigate the rough waters ahead. They wished to seek guidance from the Supreme Court on the unanticipated situation the country finds itself in. But only the President can seek such interpretations according to the Constitution. The President’s refusal to serve as a conduit for the Election Commission has put the Commission in a hard place. What it can now do is to seek advice and assistance from the Attorney General and several independent counsel, recognised as eminent practitioners of constitutional law. The final decision will have to be made by the Commission. But the larger context is not conducive to optimism.

Why no emergency?
Let’s take the curfew and the various orders issued in relation to it. A curfew is a serious infringement of liberty. Millions have been prevented from engaging in their livelihoods; many have been compelled to draw down their savings and even pawn their valuables; businesses have suffered enormous losses; and so on. Thousands have been arrested for curfew violations. Let me be clear. These have been necessary sacrifices. I agree with the emergency measures that were implemented on advice from experts within Government on control of epidemics and from various parties including a trade union representing Government doctors. The success of the preventive measures may be seen by the relatively low incidences of cases (though it appears that South Asia is an outlier in terms of the disease). According to a recent report in The Hindu: “According to the latest figures, the eight SAARC nations account 1.1%, approximately of the world total of 2,265,727 coronavirus cases. In terms of fatalities, the SAARC total is half a percentage point or (0.49%) or 768 of the total of 155,145 people who have died of the infection.” This must be seen in relation to the fact that these eight countries are home to 21% of the world’s population. Yet, I am discomfited by the lawlessness of the anti-COVID-19 measures. In law-governed societies, the state does not violate the liberty of the citizens outside the powers set out in some form of written law. In countries that give primacy to the rule of law, actions necessary to deal with extraordinary events such as disasters, civil unrest and epidemics are taken under legislation that set out “states of exception” or states of emergency, which is the term used in Sri Lanka. The basic idea is that a piece of legislation defining the start and end of a state of emergency is approved by the Legislature and amended periodically as necessary. All actions during the state of emergency are taken according to emergency regulations promulgated under the law. These regulations are worked up by the Executive and need not be approved by the Legislature prior to coming into effect. But their very existence in written form allows the Legislature to modify or rescind them later and, most importantly, for affected citizens to challenge actions taken beyond what is permitted by regulation. Because of the abuse of the Public Security Ordinance, No. 25 of 1947, by various governments, especially by the 1970-1977 Government headed by Sirimavo Bandaranaike, the law was amended in 1978 to require monthly approval for the extension of the state of emergency by Parliament. Even though the ruling coalition in 1994-2000 had a wafer-thin majority, it managed to use emergency powers by going through this procedure month after month.

Absence of the rule of law
If ever there were circumstances meriting the declaration of a state of emergency, it is now. But the powers set out in the Public Security Ordinance are not being invoked. Curfews are being declared, people are being arrested, livelihoods are being affected, businesses are being closed and opened all without any specific authority granted by regulations promulgated under the Public Security Ordinance. And sadly, surprisingly, no one, including those who seek to represent the people at the General Election that is in contention, seems to care. No one is making a fuss about this fundamental disregard of the Rule of Law. This is why I am pessimistic about constitutionalism in Sri Lanka. The silence and implicit concurrence of citizens and opinion leaders indicate the dominance of the Kandyan feudal mindset. The King is all-powerful and can do anything. What need do we have for written law?

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Sri Lanka has to shift away from passive tests, to active, voluntary and targeted testing as curfews are lifted

Covered in Economy Next and the Daily News

By Fellows of the Advocata Institute

Voluntary testing, random testing of people in high-risk areas will increase the chance of asymptomatic index cases and members of clusters being discovered.

In dealing with the COVID-19 pandemic, Sri Lanka has been aggressively contact-tracing and later testing contacts of index cases that have turned up showing symptoms. Contact tracers in the health service and military have done a commendable job.

Initially, Sri Lanka did not test contacts of index cases as soon as they were quarantined and also did not test quarantined persons before release. But these are gaps that have now been closed.

In addition, tight curfews have been placed in the country for weeks, for any exposed person that the contact tracers had missed, including anyone who came to the country before March 19 when the airport was closed, to develop symptoms and come to the hospital.

Several large clusters including the Bandaranaike Pura cluster relating to an index case that returned from India on March 12, as well as the cluster from a case found in Suduwella Ja-Ela during curfew shows that the strategy was useful.

Source: Ministry of Health, Sri Lanka; Ministry of Health, Vietnam

Current Testing Strategy is Dependent on Symptomatic Cases

The current contact tracing strategy has a serious flaw in that it is too dependent on symptomatic cases and there is no way to detect an infected index case that is asymptomatic.

The best practice adopted in the countries with the most success is to trace at least three levels of contacts (F1, F2, F3) of an index case (F0). If there are confirmed cases at any given level, the next level is traced, quarantined and tested.

The longer the delay in discovering the index patient, the higher the chance that the disease has spread to multiple levels. Each level expands exponentially, therefore time is of the essence.

Contact tracers wait for index cases to show up in the hospital with symptoms to find the contact levels to kickstart the tracing process.

Authorities also wanted to get all index cases to state hospitals where they are able to exercise tight control and prevent further spread.

In a situation where tight curfew is imposed, this may be acceptable as the exponential expansion of new levels of contacts is stopped and the cluster is localized to where people can move around in houses close by.

However, it will not be the case when the curfew is lifted.

High-Risk Groups during Curfew and After

Even during curfew, there are several high-risk groups that may get infected. These are delivery personnel, postmen, drivers and cleaners of vehicles, as well as medical staff and cleaning staff at hospitals.

Once curfew is lifted, the front office staff of any institution including airports, quarantine workers, cleaning staff, people working in economic centres, and drivers may be exposed to higher risks.

Those in driving/delivery related jobs, in particular, would also be in a position to spread the disease faster and to a greater area.

After curfew is lifted the government could sample test people in high-risk areas.

These include front office staff of hotels or any company, cleaning staff, transport and delivery personnel, restaurant/supermarket workers, taxi, truck, and other vehicle drivers and sex workers.

Voluntary and private random testing

Sri Lanka has imposed a price control on PCR testing. This price control does not account for the costs of personal protective equipment, the cost of medical staff, and the safe disposal of medical waste.

If the concerns of authorities are that hospitals could get infected, testing and sample collections could be done outside of private hospitals.

Removing the price control would allow competition to drive the cost down, and would allow the private sector to expand testing capacity.

Opportunities should be provided for companies to negotiate bulk discounts and multiple validated testing points should be allowed. Companies and employees could be encouraged to share the cost.

To reduce the cost on the government, opportunities should be provided for voluntary testing and testing at the cost of the employer; especially for front office staff and sample testing of factory workers.

This way any index cases that have slipped through the net and any second contacts of index cases who have since recovered could be discovered.

Under the current testing strategy, there is zero chance of an asymptomatic person being discovered by authorities. Since the growth of a cluster is exponential, time is of the essence.

People may require a test for a variety of reasons.

Any individual who does not have symptoms but may feel that he/she was exposed due to going to a crowded place or any other high-risk location, that they have COVID-19 should have an opportunity to get a PCR test from at his or her own expense, preferably through a drive-through system.

Any individual who has to look after an elderly person or visit an elderly person may have a need for a test.

Many countries, including Korea, are already asking for pre-flight tests from foreign visitors. The current state testing regime there is no opportunity for anyone to get a test.

Drawing from the process adopted in countries like the UAE, results could be sent by text messages and other online methods. The same could be shared with authorities to construct a live map without burdening the public sector.

Sacrificing food security for self-sufficiency

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

The fallacy of a society that thrives on the myth of “self-sufficiency” after the colossal failure during the mid-70s that left nearly the entire population sans the ruling elite’s belly full is making the rounds again. The very definition of the term “self-sufficiency” has different meanings. One school of thought is going back in time to an era where Sri Lanka never existed on the international map with absolutely zero trade. In this instance, one had no choice as you live off of what you grow. Then there are the alternative arguments – the one that argues that one needs self-sufficiency to ensure food security; to be self-sufficient in food but import fuel, coal, medicine, raw materials, and other “essentials” as prescribed by the state. There are others who believe our trade deficit is beyond our means and we need to be self-sufficient to the extent of our export capacity. Out of all the arguments, the one on food security is the most popular. Hence, let›s take a look at data and definitions on food security and evaluate whether Sri Lanka can truly be “self-sufficient”.

What does food security mean?

The popular belief of “food security” is to have enough food for our consumption during a crisis. The present global COVID-19 crisis we are grappling with is a prime example. Another common myth on food security is having sufficient food stocks to last six months and the ability to produce the required calorie intake within the country’s territorial borders. The Food and Agriculture Organisation of the United Nations (FAO) and the World Food Summit have defined food security as follows: “Food security exists when all people, at all times, have physical and economic access to sufficient, safe, and nutritious food that meets their dietary needs and food preferences for an active and healthy life.”

Despite popular belief, to achieve food security, the country in concern need not produce the food it needs within its borders. The key is to produce the required food at scale and desired quality economically. Otherwise, we will waste our precious and limited resources. For example, take Singapore which has a land area of just 725.7 km2, compared with Sri Lanka’s 65,610 km². Singapore has topped the global food security index for the second year running, despite lacking commercial agriculture. This is because Singapore has integrated fully into the global food supply chain and constructed adequate storage to feed its citizens during external shocks. This is truly remarkable as Singaporeans can consume food that is, as defined by the FAO, safe, sufficient, and to the preference of the consumer. In comparison, Sri Lanka is ranked 66th in the same index. How can we ensure fellow Sri Lankans have access to food physically and economically at all times? According to the FAO definition, it is evident through the COVID-19 crisis that although we have food physically, our food security as a country has been hit by not having physical access to this food due to delivery concerns, people losing both economic and physical access to food due to the interruption of their daily wages, and the absence of food preferences. The failed socialism experiment adopted by the Bandaranaike Government failed to achieve any of the above. Food was inadequate, to say the least; choice was a dream and quality was never present. If a citizen was apprehended with anything more than that was rationed, it was deemed a heinous crime and he or she was promptly jailed. Flour was infested with bugs and rice with stones, and apparel was perfumed with the stench of kerosene and the risk of setting on fire those who were careless near the wood-fired kitchen stove. We had the longest queues in the world for the poorest quality of bread, and that too for only one loaf irrespective of the size of your family. In summary, for the urban community (where the majority had cash to buy food), food security was challenged by the absence of physical access and preferences, while the rural and estate communities’ food security was challenged by the absence of income and preferences as they consumed whatever that was available in their gardens or that grew in the wild. So it is obvious that food security is not something we can attain just by trying to be self-sufficient as there are so many other components to it such as access, affordability, safety, preferences, and nutritional value. According to FAO, the average daily per capita energy requirement per person is 1,680 kcal and Sri Lanka on average is at about 500 kcal above the limit, but according to census and statistics data, the energy intake in the poor segment across Sri Lanka is below world standards. So if we are serious about food security in the long run, we need to ensure our people can afford safe and nutritional food, maintain access, and ensure choice rather than living in the fallacy of self-sufficiency. To achieve this, we need to create secure access to the global food supply chains so that our people can afford the diverse range of food required to meet their energy intake (balanced diet). Then the next question one may have is whether this means that we are going to import all our food and whether we have enough foreign exchange to import all that we require.

Low agriculture productivity

To answer both aforementioned questions, we need to check why the productivity in our agriculture (sector) is low. The technology not reaching our paddy fields is the common excuse that has been given over the years. But have we thought about the reason why technology hasn’t reached the paddy fields? Out of 6.5 million hectares of land in Sri Lanka, 5.4 million hectares are owned by the government. As a percentage, private lands are just 18% of Sri Lanka’s total land extent. Farmers are required to take a permit from the government office if they are to cultivate a higher-yielding paddy. Access to a bank loan is very limited for most paddy lands as farmers are not given the title to the land they cultivate. No construction can be done on paddy land as it’s forbidden by law. Under the current regulatory regime, no investor would invest in a greenhouse farm or high-tech farm. In addition to the above, most of the paddy lands are fragmented, so the opportunity to scale up for a big operation is very limited, keeping costs of production high. This means that even if we were to go back to self-sufficiency and cultivate in our backyards, we have just a fifth of our entire land to cultivate, build houses, and do all other industrial work. This also means that we have about 25% of our labour force engaged in farming, but contributing only 7-8% to our GDP, which leaves most of our land unproductive.

Importing food and the trade deficit

Extreme self-sufficiency is not at all an option regardless of how resourceful we are, as it is obvious that we can’t produce all that we need – for example, fuel and machinery. The only way to keep our trade deficit narrow and convert it to a surplus is to develop our exports. Exports and imports are two sides of the same coin. We import products we cannot produce or products for which we do not have a competitive advantage. We export commodities and services where we have a competitive advantage. Following is an extract from FAO which summarises why food security can only be achieved by global collaboration: “Global food trade has to be kept going. One of every five calories people eat has crossed at least one international border, up more than 50% from 40 years ago.” Therefore, our inability and traditionally lethargic approach to developing our exports should not be a trade compromise for the real and meaningful food security of our people.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Covid-19 Policy Responses: A summary note to policymakers

By Advocata Institute

At the time of writing there are more than 1,300,000 cases worldwide and more than 74,000 deaths. Humanity faces a global crisis on a scale never seen before.  Health sector, security and emergency services personnel deserve praise and gratitude for their dedication.  

We offer the following for policymakers as input to make the difficult decisions in front of us as Sri Lanka deals with the COVID-19 pandemic.

To deal with the short-term problems, use existing mechanisms 

The government’s centralized and controlled approach to the delivery and distribution of goods has meant consumers, traders and producers have been squeezed at every node of the supply chain. In order to allow some parts of the economy to run at minimal risk, and reduce incentives for people to break curfew, the government should consider expanding the definition of essential services. 

Developing a non-reversible and consistent policy on curfews for supply chain actors, including delivery personnel, will ease pressure on consumers and producers who at the moment can’t get their products into the hands of consumers.  

A roadmap for reopening the economy

It is useful to think of the policy responses for the pandemic in phases. In the first phase the objective is to slow the spread of the virus by using a strategy of self-quarantine for much of the population by the way of curfew.  Yet the curfews cannot last forever, and they come at a significant human and economic cost.

As the short term emergency situation begins to settle,  policymakers should work with epidemiologists, security personnel, private sector and other stakeholders to develop a roadmap for re-opening. This will enable people and businesses to plan their activities effectively so as to mitigate the cost to their daily lives and business operations.  

An action plan for expanding testing 

The “trace - test - treat” method has shown to be effective in countries such as South Korea and others which have faced up relatively well to this public health crisis. The government’s decision on 31st March to expand testing to check for community transmission is a step in the right direction.

It is vital policymakers develop a clear and focused action plan to utilize the country’s existing testing capacity in government,  universities, research institutes as well as the private sector. The government can tap into private sector access to international supply chains and engage with potential donors to acquire and expand the testing capacity in the country.  

Re-examine the policy on wearing masks

Preventing a rise in cases will depend on individuals limited outings only to the essentials, practicing strict physical distancing and wearing masks. While the official stance of the WHO is that if you are not a medical worker and you are not ill, you do not need to wear a mask, it is also clear that this recommendation is driven by a global shortage of masks. Most recently, the United States of America shifted their stance, with their Center for Disease Control recommending general mask usage to lower rates of transmission. 

As such, while Sri Lanka should also prioritise mask supply for health care workers and others on the frontline on this crisis, the government should revisit its position on mask-wearing, and actively engage with the private sector to rapidly increase mask production.  

Letting the markets work

Re-visiting price controls and understanding their medium to long term impact

The government has already imposed price controls on a variety of items.  As research by Advocata Institute shows, even in normal times these controls mostly serve as political theatre,  with the government's own data showing many consumer items being sold at above the controlled rate. A  price is a signal wrapped in an incentive; it signals shortages and surpluses,  if a producer can’t make a profit they would not go through the trouble and risk of acquiring the item. In a lockdown,  price controls will only exacerbate the supply constraints.

In the coming months, price controls are a policy measure that should be avoided. 

Moving away from planned import restrictions

In an attempt to ease pressure on the exchange rate and protect the local agricultural industry, the government has announced the halting of all non-essential imports. As of the point of writing, this statement has not been substantiated by either the Central Bank or the Ministry of Finance, creating policy uncertainty. The introduction of a negative list of those items that will not be imported into the country in order to protect the rupee could be considered,  yet this should be a short-term, time-bound measure.  

Prolonged import restrictions and a government-imposed ‘essential lists’ will create ripple effects that will harm the welfare of consumers, producers and vital supply chains. The revitalization of our export industries and the manufacturing sector will be key to economic recovery in Sri Lanka. Intermediate goods and raw materials amounted to 46% of Sri Lanka’s imports in 2017, and long term import restrictions will hamper the ability of local businesses to recover and recoup losses after this crisis passes. This will also make domestic incentives favourable to non-competitive import subsidies. 

Moving towards a recovery 

Going forward, monetary policy and fiscal policy must work together well based on a credible macroeconomic program. While its effectiveness will be low in the short run due to COVID-19, it will signal a government committed to surmount the present difficulties.

The World Bank project of USD 128.6 million was much needed, and now having secured this, Sri Lanka should work towards a concrete engagement with the IMF. Apart from being a source of much-needed funding, an IMF programme will also bring fiscal discipline to the country. We should also actively explore engagements with the Asian Development Bank, with an aim to speed up the disbursement of existing loans. 

Overall macroeconomic policy should aim to keep inflation and current account deficit in the BOP sustainable, as this would create the necessary environment to undertake real sector reforms. Trade reform to ensure the free exchange of goods and services, and domestic regulatory reform to help businesses recover and restart should be priority areas of focus.   

Private sector participation in the path to recovery is crucial. Clear, consistent engagement with independent-minded experts, and including these individuals in an advisory capacity to the Central Bank and Ministry of Finance would lend credibility to the government, and signal that Sri Lanka is serious about laying a strong foundation for a healthy economy.

READ COMPLETE POLICY NOTE.

Attracting foreign exchange: Are we on the right track?

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

What should be our mandate for the coming Sinhala and Tamil New Year? We have to be psychologically prepared to work harder and develop the ability to drive and lead in the best of times as well as the worst of times that are about to dawn on the horizon. Amidst the COVID-19 battle and a quarantined Sinhala and Tamil New Year, the recent figures by the Department of Census and Statistics indicate that our per capita GDP for the year 2019 (which is a reasonable measure to evaluate the standard of living) is at $ 3,852 per annum, a drop from $ 4,079 in 2018 (In USD terms, this is a 5.5% drop compared to 2018 and a 3.9% increase in LKR terms). In 2015, our GDP per capita was $ 3,842. In USD terms, we have pretty much slipped to where we were five years before.

Just to bring our performance into perspective, Japan’s GDP per capita is around $40,000. The standard of living in Japan is 10x as Sri Lanka. Our GDP growth rate is estimated to be at 2.3%, another 0.3% drop from the initial estimation of 2.6%. What this means is Sri Lanka will take 30 years to double our living standard if we are to move at this pace. And even then, we will be falling 5x behind Japan’s present standard of living. We are heading towards a difficult and challenging time period with a bad start. We can overcome this only by working together locally and forging partnerships globally. We have to find opportunities in this crisis and navigate by adding more value to our goods and services which the global market seeks. Our mandate in this New Year should be to be competitive, serve market opportunities, and capitalise on the limited opportunities before us. However, this is easier said than done. In this context, the decisions we make and the messages we push will determine where we are heading towards and the fate that awaits us in the not-so-distant future.

Measures by the Central Bank

It is no secret that Sri Lanka requires foreign exchange to pay back our import bills and the loans that we have taken. We import almost double what we export, hence the balance in the current account – or in common man’s term, imports exceed our exports. This trade deficit has to be narrowed, and this is the challenge. Over the years, instead of implementing the required reforms to make our exports more competitive and to close the gap, our constant strategy has been curbing imports to narrow the trade deficit. Today, we have arrived at the point of no return. With little growth in exports and debt beyond our means, the Sri Lankan taxpayer has racked up debt of about $ 16 billion payable by 2023. The Government took to implementing a futile policy of banning the importation of non-essentials including vehicles. Our rupee has depreciated nearly 70% over the past decade. On 8 April 2020, the Sri Lankan rupee passed 200 against the dollar. Given the ongoing crisis, we are left with few options to save precious foreign reserves as raising money from the market at the present risk premium is almost impossible. However, data indicates that the Central Bank continues with quantitative easing – printing money or adding more money into our financial system – which is the main reason for our currency to depreciate. On 24 February 2020, the Central Bank of Sri Lanka made a Rs. 24 billion profit transfer; on 13 March, the Central Bank injected Rs. 50 billion by buying government securities; and on 17 March, the Statutory Reserve Ratio (SRR) was brought down to 4% from 5%, which injected a further Rs. 50 billion to the Sri Lankan economy. The meaning of the statutory rate cut is that all licensed commercial banks earlier had to maintain a mandatory reserve of 5% of their total deposits with the regulator (deposit liabilities), but now have to maintain only 4%. This money will most likely be utilised towards relief measures provided by the Government. As we continuously highlighted in this column, the Yahapanala Government made the same mistake of imposing import controls and providing cash injections to the system, which resulted in the rapid depreciation of the rupee. The value of the rupee is a market function and trying to distort (it) by intervention is not advisable. In this case, with the devaluation of our rupee, the prices of food and medicine will go up, thereby increasing poverty levels.

Appealing for foreign currency deposits

On 2 April 2020, the Governor of the Central Bank appealed to domestic and international well-wishers on behalf of the Government of the Democratic Socialist Republic of Sri Lanka to deposit foreign exchange into Sri Lankan banks with an assurance that no questions would be asked on the financial trail of the funds. In the appeal, the Governor of the Central Bank mentioned that the money would be accepted without any hindrance from the Central Bank and the banking system and will be exempted from exchange control regulations and taxes for three months from 2 April 2020 onwards. At the point of writing this article, the Central Bank has not published further guidelines; only the statement by the Governor is available. However, it is of paramount importance that these measures do not impact Sri Lanka’s ratings by rating agencies as this would further erode our capacity to work with international donor agencies and financial markets. We have to be cautious not to open space for money laundering while we take decisions at this serious moment to attract more foreign currency. As a result of the serious efforts by the Central Bank of Sri Lanka, we were delisted in the grey list of the Financial Action Task Force (FATF) in October 2019. The FATF is the global policy setter on anti-money laundering and countering the financing of terrorism. A delisting from the FATF grey list is a positive indication to the market to attract quality investments which look for a credible financial system. At the same time, we have to be vigilant not to breach the code of conduct and ethical guidelines of international donor agencies, as there is a high possibility of Sri Lanka knocking on their door as a fallback option. In 2001/2002, a similar tax amnesty scheme was brought by then Minister of Finance K.N. Choksy and the proposal was reversed soon after the new Government was elected in 2004. There are no short-term solutions to mitigating long-term macro issues. Time and time again, it has been proven that curbing imports is not the solution and monetary prudence is the way to stabilise the rupee. The motivation behind these measures is understandable as our foreign exchange income is very tight, but in this new Sinhala and Tamil New Year, we must ensure the cure is not worse than the illness.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Sri Lanka’s weak public finances will exacerbate economic shocks from COVID-19

Covered in the Daily News and published in the Daily FT, Lanka Business Online and LMD

By Fellows of the Advocata Institute

The country will have to borrow heavily and go in for a new IMF program

Sri Lanka’s shaky public finances are about to receive another blow from the fallout of COVID-19. The most crucial aspect of a pandemic is always the human cost, but the spread of the virus has important repercussions for the economy. Studies indicate that pandemic impacts a country's economy through several channels, including the health, transportation, agricultural and tourism sectors. As borders are closed and global markets slow; trade is impacted, so exports suffer.

Sri Lanka’s already-battered tourism industry will be further hit  and the order books of some of the key exporters will suffer in the next quarter.  As international supply chains contract exports may remain constrained, even when markets reopen as components and raw materials may remain in short supply. The supply chain impact will affect even domestic producers as imported raw materials run short. Agriculture depends on imported fertiliser, pesticides, planting materials and chemicals. Local factories source raw materials, components and spare parts from overseas and may be unable to work at full capacity.   

As cashflow dries up and debts mount, many businesses will find it difficult to cope. During the global financial crisis of 2008/10, an estimated 90,000 Sri Lankans lost their jobs due to downsizing amongst manufacturing firms, especially in the apparel sector. The impact of the current crisis has the potential to be worse because unlike the financial crisis, this pandemic is not confined to advanced countries. Developing countries were affected due to the loss of export markets but their domestic markets were unaffected. This pandemic is affecting both developed and developing countries.  Daily wage-earners will see their already uncertain incomes further dampened. Small businesses will be among the hardest hit.  

This would mean that growth will slow further. The budget deficit will take a double hit from falling revenues and increased expenditure. Lower levels of activity mean lower levels of tax collection. As sales and imports decline, the collection of VAT and import taxes will decline. As business profits fall, income tax collection will fall. Meanwhile, government spending on health (from testing kits to hospital costs) and relief measures will rise in response to the pandemic. The budget deficit will thus widen and the government will need to borrow more.  Sri Lanka’s interest bill this year alone will be Rs 1 trillion.

Even if public finances were robust, this would pose a significant challenge, but Sri Lanka’s finances --  sickly to begin with -- were weakened by recent tax cuts. The fallout is difficult to estimate but a recap of the principal issues is useful to assess the available policy options.    

Sri Lanka obtained an IMF facility of US$1.5bn in June 2016. This is the 16th instance when it turned to the IMF since joining the fund in 1950 - an indication of the systemic and long-running nature of the underlying problems. The overall objective of the recent IMF programme was to “reverse a two-decade decline in tax revenues and put public finances on a sustainable medium-term footing”. The programme aimed to increase government revenue to reduce the budget deficit and therefore the public debt (as deficits fall, the need to borrow reduces). 

In the popular imagination, IMF programmes are associated with austerity: cutting government expenditure which negatively impacts social and welfare spending. The reduction in expenditure closes the budget deficit at the expense of the welfare programmes. Under the previous ‘Yahapalana’ regime, Sri Lanka did the opposite: increasing taxes to cover the deficit. Expenditure was left untouched and in fact, continued to increase.

Unfortunately, the bulk of government revenue comes through the form of consumption taxes particularly VAT, so much of the burden of increased tax fell on the general public anyway, provoking intense displeasure. Income taxes were also increased, angering the business community. The government thus succeeded in antagonising a remarkably diverse set of constituents and became exceedingly unpopular.

Public finances did improve somewhat but were never very strong. With the attacks in April 2019 things started to slip again.  The IMF review in November 2019 noted that “the fiscal targets are no longer within reach, due to the significant revenue shortfalls”.

Following the Presidential election of November 2019, the new government announced sweeping tax cuts in December. Given the unpopularity of the tax increases, responding to public frustration could hardly be faulted,  but the breadth of the cuts was astonishing. Corporate income tax was reduced from 28% to 24%,  VAT was halved from 15% to 8% with a high vat-free threshold;  withholding tax, nation building tax and economic service charge were scrapped. The objective was to kickstart a floundering economy but the cost –around a quarter of government revenues or 3-4% of GDP destabilised public finances.

On 7th February 2020, the IMF noted that: “Preliminary data indicate that the primary surplus target under the program supported by the Extended Fund Facility (EFF) was missed by a sizable margin in 2019 with a recorded deficit of 0.3 percent of GDP, due to weak revenue performance and expenditure overruns”. According to the fund, Sri Lanka’s 2020 budget deficit could rise to 7.9% of GDP, the highest since 2015. Given the pandemic,  this will look optimistic. The reported deficit for 2019 was 6.5% but according to the Ministry of Finance “the actual budget deficit for 2019 should have been over 8 per cent” as around Rs.367bn of expenditure remained unpaid and unaccounted at the year end. 

Meanwhile the rating agencies Fitch and S&P downgraded the outlook on Sri Lanka’s debt to ‘negative’ from ‘stable’.   Sri Lanka’s already wobbly public finances must now cope with the added economic shock of COVID-19. 

Dealing with the public health emergency and the associated human cost should be top of mind for policymakers. Yet clear-eyed economic thinking will be equally important and will have a direct bearing on the human cost, particularly for our society’s most vulnerable.  This is why weighing the relative costs of a lockdown or a complete curfew is important. 

The biggest headache for the government will be managing foreign debt. The Central Bank’s freshly minted medium term debt strategy is based on assumptions that no longer hold -- 5 percent GDP growth over the medium term, inflation of 5 percent and a budget deficit of 3.5 percent. With the medium term strategy in ruins can the government rollover the maturing debt? 

Gross reserves stood at US$7.9bn equivalent to 4.6 months of imports in February 2020. External debt repayments are around US$5.6 bn in 2020. This has been partially refinanced by a US$500m loan from China which has reportedly promised a further US$700m. The country will be looking to raise a further US$2-2.5bn at least if it intends to repay this year’s debt while maintaining a minimum reserve of three months imports.  

With its public finances in shambles, the IMF programme derailed and inevitable debt downgrades expected from rating agencies it is impossible to return to the market to borrow. The yields on Sri Lanka’s sovereign bonds maturing this year have spiked.  At the time of writing, investors were asking for a 101 percent increment on the current yield, bonds maturing next year are at 44%. A new IMF programme will restore confidence to the markets but that would mean a return to painful tightening. Appealing for further bailouts is thus the most attractive option.

Sri Lanka is among the countries that have called for debt relief. The call has been supported by the World Bank and the International Monetary Fund (IMF). Although the call is for the poorest of countries,  there are signs that these organizations will consider countries recently transitioned into upper middle income category like Sri Lanka. Some commentators have even suggested that the government should simply default.  While this may appear simple, it is risky and even restructuring of commercial debt: deferring or reducing repayments is viewed by the markets as a default event, which means it will be difficult to return to the markets for a while. It also delivers a shock to the economy with declines in GDP, investment, and private sector credit being common. The financial sector may be affected leading to bank failures.

An IMF study in 2002 covering restructurings by Russia, Ukraine, Ecuador and Pakistan in 1998-2000 showed as a result of the restructuring:

 “The decline of real income and financing was transmitted to domestic demand. Confidence plummeted and private investment was curtailed sharply. Private consumption followed, albeit with a lag, as for a while households drew down their available savings. Public consumption was also scaled down reflecting efforts to consolidate public finances. Despite exchange controls, exchange rates depreciated sharply reflecting the shortage of foreign funds resulting from capital flight. The domestic demand contraction and import substitution helped improve current accounts. The exchange rate depreciation passed quickly to prices and inflation surged. Wages lagged, inflation wiped out the value of deposits, unemployment rose, and households suffered significant real income losses.”

Sri Lanka thus finds itself in a tricky position with little room to manoeuvre.  These problems are not due to COVID-19 alone, although it has made matters much worse.  The pandemic has only precipitated the policy weaknesses that were building up over decades into a single giant shock encompassing growth, fiscal and external sectors at the same time. 

This was also the case in the countries in the IMF study referred above where following a relatively short history of access to international capital markets, the macroeconomic situation was destabilised by domestic policy shortcomings and exogenous shocks: weak oil prices for Russia and Ecuador, international sanctions following nuclear testing for Pakistan, the El-Niño effect for Ecuador, Russia’s turmoil for Ukraine, in addition to an unfavourable external environment after the Asian crisis.

In the short-term bailouts will be necessary,  but it is only a temporary measure, postponing the issues for a later but not too distant date. Whilst further bi-lateral loans from China are a possibility,  given the global nature of the COVID-19 crisis, further bi-lateral aid may not be a realistic option. With it’s $1 trillion lending capacity, an IMF program provides perhaps the only realistic option to access further borrowing.  

Politicians and citizens who have been living in a state of denial must wake up to the grim realities. Pre-election bravado and long touted conspiracy theories must give away to level-headed thinking and negotiations with global financial institutions. Economic management should be done in consultation with all other statutory agencies that are empowered to play a role. 

Mistakes could be costly and run the risk of turning the COVID-19 outbreak from a severe public health crisis into a devastating economic crisis.  

Containing, reactivating, and managing: Sri Lankan economy’s triple challenge

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

There are many questions wafting around and these questions need solutions. In a crisis, we may not have the perfect answers for most of our questions, but we have to keep our eyes open for alternatives. The problem at hand requires a wider social discussion and ideas for pragmatic action within our capacity which fit the current context.

Problem 1:

Containing the spread of the virus as well as ensuring food and other essential supplies reach 5.3 million Sri Lankan households is the need of the hour. An urgent day-to-day operational strategy is required and this needs to be complemented by fast decision-making at a macro level.

Problem 2:

Re-activating the economy and covering the losses due to the lockdown. This too requires a short to medium-term strategy and poses the most challenging task.

Problem 3:

Managing macro-level financial commitments and stabilising the economy. The third problem requires diplomatic relations alongside negotiation with international donor agencies and bilateral international partners.

Problem 1: Economic angle of stopping the spread of the virus and providing essential supplies

According to the World Health Organisation (WHO) and health experts, testing as much as possible followed by contact tracing of the positive cases is the recommended formula for success. “Trace, test, treat,” they say. However, this approach may change depending on the phase of the pandemic. According to the Government Medical Officers’ Association (GMOA), Sri Lanka is at the third phase where cases from the community or small clusters have been reported.

Other countries have succeeded in using the testing method, with South Korea being one such example. They organised drive-through testing facilities and centres and now have the distinction of being the country to have conducted the most number of tests for Covid-19 per million people. (Sri Lanka has currently tested only 2,277 cases, or 87 per million people. Countries such as South Korea have tested 410,564 cases or 7971.04 per million people.)

They also came back strongly following the Patient 31 incident (a patient who attended a religious observation with a few thousand people, causing a sharp rise in the reported cases of Covid-19 in South Korea over a short period).

To increase the testing capacity in Sri Lanka, the Government opened testing facilities for the private sector under the condition the tests can only be conducted for in-house patients and would not be conducted as a laboratory operation. However, Vidya Jyothi Prof. Vajira H.W. Dissanayake highlighted the need to have more collaboration with private hospitals and university laboratories in order to scale up Sri Lanka’s testing capacity.

This same recommendation applies for the distribution of food and essential items to households. The Government setting up a new delivery channel at this point in time will be costly. The faster route is to utilise the existing private sector delivery channels to distribute food from farms to households. The Government’s initiative in partnering with existing food delivery companies is a move towards the right direction. We need to expand more from farmers to wholesale shops and wholesale shops to retailers.

As a piece of advice, the Government should not move in the direction of imposing price controls on vegetables to avoid market shortages, which we are currently experiencing in the case of tinned fish and dhal. The Government should refrain from setting up price ceilings or making promises to the farmers to buy all the vegetables in the market as this will distort the price elasticity of supply and impact the quality of the produce, as well as negatively impact small businesses, delivery channels, and small newly formed ICT (information and communication technology)-based food supply operations.

Problem 2: Reactivating the economy

Reactivating the export businesses requires recovery in international supply chains and production networks as well as recovery in the local economy. It was estimated that during the global financial crisis in 2008/10, Sri Lanka lost about 90,000 jobs. The global financial crisis was confined to one part of the world and we felt the impact of secondary shocks.

The Covid-19 pandemic has affected almost all countries and so a serious impact can be expected. Providing a stimulus package or giving the option for EPF (Employees’ Provident Fund) members to take 20% of their money have been put forward as proposals.

The important focus is to have businesses with the capability of bringing in foreign exchange as this has become the need of the hour. We have had high hopes for the tourism sector and have invested resources into this sector, including a campaign with international media agencies to scale up the industry from $ 4 billion to $ 10 billion.

For this year, our hopes on tourism have been dashed given the obvious global dynamics. In export industries, there are no short-term solutions and the Government has allowed a special pass system to operate certain export industries. Having working capital for export industries to operate till the markets come back to normalcy has to be the priority, and next, reforms on export development to improve competitiveness must be the long-term game.

As a suggestion post-Covid-19, we can declare a six-day work week to compensate for possible losses. The Government can consider declaring some holidays as working days, providing space to observe one’s religion on religious holidays.

Problem 3: Managing macro financial commitments and stabilising the economy

It is evident that the Central Bank and our economy is at an absolutely serious juncture of not having adequate foreign exchange (or US dollars in layman’s terms) to pay for our imports and settle upcoming debt repayments.

Central Bank data indicates that it has sold about 12 tonnes in gold reserves. On Thursday (2), the Central Bank announced the halting of imports except essentials, pharmaceuticals, and fuel. They further made a public appeal to deposit foreign currency in the Sri Lankan banking system and that all deposits will be exempted from exchange control regulations and taxes.

While we expect well-wishers will bring the money back into the system, it is critically important that the Government negotiates bilateral loans with neighbouring and supporting countries. Unfortunately, all countries may require urgent cash injections, but given the size of our economy, there will still be space for negotiations, hopefully with no strings attached.

In the meantime, we need to negotiate our loan repayment plan and reschedule wherever possible with international donor agencies. The near-zero interest rates in the US will provide further space for rescheduling.

Finally, as a fallback option, the Government has to start discussions with the International Monetary Fund (IMF) for a bailout programme to support our debt repayments of more than $ 5.8 billion this year and approximately more than $ 8 billion from 2020-2024.

Submission to the Expert Committee to Evaluate the Millennium Challenge Corporation

In April 2018, Sri Lanka was awarded a compact grant of USD 480 Mn by the Millenium Challenge Corporation. The Millennium Challenge Corporation (MCC)Compact presents Sri Lanka with a much-needed source of funding and should be accepted without further delay. The Government of Sri Lanka has been a part of this grant process and has recognised the issues of transport and access to land, and the constraints they place on growth.

READ THE COMPLETE REPORT

The other side of the Government’s relief measures

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

This has not been an easy time. We are moving through the third week of Covid-19 in Sri Lanka following the identification of the first local patient. Medical experts have advised us to continue social distancing in the critical weeks to come. Fortunately, no deaths have been reported so far and a few patients have successfully recovered as of 27 March 2020. That’s a big relief. I am sure no Sri Lankan ever thought that one virus could have caused such damage, but it has.

According to the Government Medical Officers’ Association (GMOA), we are in the third phase of the crisis. The Government and healthcare experts are doing a commendable job of putting a stop to the spread of the virus. This covers the healthcare side of the matter. The other side of the coin is the economic management that must complement healthcare measures.

As we are still in the eye of the storm, the short-term consideration of having enough essentials to put food on the table has been the focus. Before the spread of Covid-19, the Government announced a new direction on delaying debt collection and tax collection across different economic sectors for state and commercial banks, which included providing a moratorium for settling personal loans and vehicle leasing instalments. At the same time, the Central Bank directed banks to halt the provision of facilities to import vehicles and non-essential goods amid the value of the Sri Lankan rupee falling to a record low. On Thursday (26), the President requested that international agencies restructure debt repayments for countries that are most vulnerable, like Sri Lanka.

The Government’s relief package and the measures needed should be assessed based on the cost that the crisis cause our economy.

Measuring economic impact

In my opinion, when measuring the economic impact on our economy, we can zoom in on four sections. Since we are still riding out the storm, it will be too early to make an accurate estimate of the impact, but we can keep tabs on the matter. I have considered only variables that are measurable, leaving aside the cost of human lives; nothing is more valuable than the life of a fellow human being.

The cost associated with battling disease

For an $ 88 billion economy, and a country with a high debt-to-GDP ratio, the unexpected cost of healthcare and pandemic management falling in a critical year for debt settlements can have severe consequences. The setting up of quarantine facilities, attempts at expanding hospitals to battle Covid-19, and concessionary packages that have been provided for the most vulnerable segments in society are the main cost centres that fall within this category.

The cost due to loss of productivity and economic activity

Not every person can work from home, and the loss of productivity in agriculture, industry, and services will cost Sri Lanka as significantly as other economies. Our low economic growth amidst the tax cuts that were provided earlier this quarter further highlight the seriousness of this matter.

The loss due to the barriers on economic integration 

The costs incurred by industries and the economy due to the disruption of economic integration are the final section that should be considered. Consumption will be very low in key European markets and in the US (our main export markets that contribute to about 35% of our total exports), which will affect demand. On the supply side, the time taken to replenish supply chains from China and other countries, especially for the apparel sector, will further impact our economy, as well as the rest of the world.

Import controls are not advisable

Many governments across the world announced stimulus packages for their economies. In Sri Lanka, the Central Bank gave directions to halt the importation of non-essential goods. This was taken as a measure to defend our currency and to bring our import bill down, but there is very little empirical evidence supporting the defence of a currency through import controls. In the Sri Lankan import basket, about 9% accounts for raw materials, another 38% for intermediate goods, and about 21% for capital goods. Petroleum is the main import, followed by raw materials for the apparel industry. Pharmaceuticals are included amongst the 30% of consumer goods imported.

Imposing import controls in the first place in defending the currency gives a wrong signal to industries and investments at a time when we need them the most. Similar measures taken by the previous Government and other governments in the past ended with the rapid deterioration of the currency and, ironically, the reserves that were used to defend the soft peg. We have to back our currency with precious metal such as gold (gold standard) or a stable currency, which is called the hard peg (a fixed rate, normally with a hard currency like the US dollar), which can be managed by a currency board (we currently run a soft peg where money can be printed without being backed by hard currency). Most developing countries shun currency boards as it imposes monetary and ultimately fiscal discipline. In the meantime, it is indicated that the Central Bank has printed about Rs. 100 billion between 13-24 March 2020 and this will be the main reason for the currency to fall further.

Secondly, an essential good for one person may be a non-essential good for another person, and vice versa. For example, a can of tinned fish may be essential for one household but for a vegetarian household, it would not even be considered an option. Many similar cases arise when governments try to intervene in defining essentials and non-essentials.

Difficulties in targeting the informal sector

In the Government’s stimulus package, a systematic targeting concern arises regarding the informal sector in the economy.  Most businesses operating in Sri Lanka fall within the micro, small, and medium sector, and a considerable amount are not registered. The Government will not be able to capture these under any stimulus package, so we have to be prepared for the impact it will have on our economy. Small-time tailors, barbers, car mechanics, fruit and vegetable sellers, furniture shops, and many businesses operate within this informal sector. They do not operate within the system of formal bank facilities through commercial banks or non-banking financial institutions (NBFIs). Instead, many work with loan sharks with loans having interest rates of 10-12% per month with an efficient collection system and a 100-day repayment period with interest and capital. For example, if I take a loan of Rs. 100,000 with a 90-day repayment period at 10% monthly interest, there will be a collection representative every day in the evening at my doorstep and I have to pay 1,500 daily (1500*90 = 135,000). In Moratuwa, where I live, where the furniture business is the main industry, I can just walk in with a cash cheque dated for three months and even get a couple of millions in less than 15 minutes. There are separate cheque collection shops in my area. Therefore, the Government will face the challenge of targeting this stimulus package to minimise the cost of loss of productivity, particularly in the informal sector.

In summary, there is an “announcement effect” and a confidence effect created by the relief package announced by the Government among the people who are not a part of the informal economy, but policymakers should take note that there are also vulnerable sectors that shoulder a large portion of our economy which has an impact on our daily life.    

Lock-downs need not be curfews

Originally appeared in Daily FT, Daily Mirror, Lanka Business Online and Economy Next

By Aneetha Warusavitarana

On March 12, the World Health Organisation (WHO) declared the new coronavirus, COVID-19, to be a pandemic. With cases in Sri Lanka reaching over a 100, the government of Sri Lanka has taken several measures to prevent the spread of this disease. One such measure was enforcing an islandwide curfew.  

The risks posed by COVID-19 to the health and safety of our population are considerable and the measures to prevent the congregation of people and spread of the disease are commendable. A lockdown may certainly be warranted, yet a highly restrictive and prolonged curfew may prove to be counterproductive. As witnessed on Tuesday, March 24,  the short window given for basic necessities such as groceries,  medicine and other supplies, proved to be not only inadequate but also counterproductive to the objective of imposing a curfew in the first place. 

The government lifted curfew from 6:00 a.m. to 12:00 noon, allowing people to purchase their essentials. This temporary lifting of curfew highlighted the flaws in the solution. With limited information as to when the next curfew would be lifted, people panicked and shops were inundated. It was not unusual to hear of someone who stood in line for six hours, practising social distancing, only to enter a supermarket that was crowded with people and filled with empty shelves. Crowds were so great that the fear is that the number of infections in the country will now rise in the weeks to come. 

Planning the shopping of an entire country or even one province is not an easy task and right now, people do not know when the curfew will be lifted next. As of Wednesday (March 25), curfew in Colombo, Gampaha, Kalutara and Jaffna has been imposed indefinitely – there is no wonder that there was panic buying

Limited information exacerbating problem
Limited information on the government’s next steps is making the problem worse. The inherent problem with a curfew is that it cannot be imposed indefinitely. People need to have access to essentials – their food and their medicine. The curfew itself was imposed with almost no prior warning, which meant that the population panicked, hitting the shops and buying groceries that far exceeded their immediate requirement.

While this hoarding of goods has been publicly criticised, one can understand the fear that drives this behaviour. Planning the shopping of an entire country or even one province is not an easy task and right now, people do not know when the curfew will be lifted next. As of Wednesday (March 25), curfew in Colombo, Gampaha, Kalutara and Jaffna has been imposed indefinitely – there is no wonder that there was panic buying. 

The government’s solution to this issue is to allow delivery services to run, while also organising a government-led distribution system of essentials to all families in these areas. The Presidential Task Force will coordinate this effort, mobilising the ‘grama niladari’, divisional secretariat, agricultural officers and ‘samurdhi’ officers.  The motivation behind this is commendable. The question that remains is whether this will be feasible and whether this is where the government should be dedicating limited resources.

Is there a more effective alternative?
The government has reassured the public, stating that there are no food shortages in the country. Empty shelves in the supermarkets are simply a result of panic buying and this appears to be true. A model that has been deployed in other countries with some success is the implementation of a lockdown and not a curfew. 

Under a lockdown, essential services such as banks, grocery stores, supermarkets, convenience stores, pharmacies and food delivery services, remain open. People are allowed out of their homes to purchase groceries, etc. with strict guidelines on social distancing being enforced.  

The government has already taken steps in this direction, with pharmacies and commercial banks remaining open and delivery services allowed to run. The next step would be to include grocery stores and supermarkets under the category of essential services. 

Looking at the example of South Korea, a success story in the handling of COVID-19, the South Korean government did not enter a complete lockdown. The government instead allowed limited movement of people but rapidly expanded their testing capacity, which helped drop the rates of infection.  

There is the concern that as Sri Lanka’s testing capabilities are not comparable to that of South Korea, we may not be able to replicate their model with an equal degree of success. 
There are other models that we can be considered in this case. In America, stores have allocated separate hours for the elderly to shop during, in order to limit exposure for this vulnerable group of the population. In New Zealand, where a little over 200 cases have been reported, the country has entered lockdown, allowing only essential services to run. 
Given the issues we have seen with curfew in Sri Lanka, the government could consider a variation on a traditional lockdown, where people are allowed to access essential services – with limitations on the number of people who can enter a shop at a time or allocating time slots for people to purchase goods. This could free up government resources currently being allocated to mass food delivery and allow these resources to instead be utilised in our healthcare sector. 

Social distancing but economic convergence

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Dhananath Fernando

The novel coronavirus (Covid-19) has taken the entire world by surprise. For Sri Lanka, this is the third time in recent history we’ve had to fight a non-terrorist enemy. Firstly, the 2004 Indian Ocean tsunami crashed on our shores, then a dengue outbreak a few years ago, and now this virus. Simultaneously, we had a 30-year-long terrorist war, followed by the Easter Sunday attacks just under a year ago. In summary, there seem to be more national emergencies than ever before.

During crises of this nature, sentiments are expressed that isolation as a country and self-sustenance are the best solutions to avoid such external shocks. It is natural to jump to this conclusion when our survival is threatened by such external factors.

However, a good story to remember at this time is one from the Buddhist Jathaka story “Sammodana Jathaka” – the story of the hunter and the flock of birds. The hunter was a threat to the flock of birds and the birds kept flying in individual directions and getting caught in the hunter’s net. After this happened a few times, the birds strategised; all flew together in the same direction towards the net, dragging it with their beaks towards a tree, and escaped. Although it seems that economic isolation, self-sustainability, and de-globalisation are the solutions, the reality is that in a world more interconnected than ever before, it is the opposite.

Economic hit

The impact of Covid-19 is unique since this is a global challenge. The economic impact of Covid-19 would be severe, both locally and globally. On the demand side, due to the closing down and locking down of cities, there will be a drastic drop in consumption. On the supply side, there will be a steep drop as the world’s factory, China, which contributes to 16% of the world’s GDP, has been severely impacted and supply chains and production network linkages are dysfunctional at the moment.

For Sri Lankans, our apparel trade will be at risk due to lower consumption in international markets (Europe and America), being unable to continue operations for the fear of contagion and facing serious difficulties in maintaining supply chains as a result of disruption within the global production network. The same will be true for most of our food exports and many other items in our export basket.

Our remittances will continue to decline given the impact of the virus in the Middle East, Europe, America, and Canada. This chain reaction continues down to the level of people not being able to pay their vehicle leasing instalments or defaulting on bank loan instalment payments. For the economically marginalised, electricity and water supply will become unattainable.

Unemployment will be higher and non-performing loans will increase. Tourism will be further affected and all supply chains connected to tourism will continue along the same downward trend. Inflation will rise, given the government interventions. The Sri Lankan Government will face serious questions on how to manage our fiscal position and keep the heavy public sector afloat in this crisis. It is estimated that it will take about six to eight months to return to normalcy and we should not forget that economies have not yet fully recovered from the Global Financial Crisis.

Price control no solution

Last Tuesday (17) night, the President announced some relief measures on the economy and precautionary measures on halting the spread of the virus. The Government’s facilitation of the quarantine process is commendable for passengers entering the country from outside. However, imposing price controls on face masks, dhal, and tin fish will not help the poor. This will simply move stocks off the shelf faster.

No seller wants to sell anything at a lower price than its actual cost. The price range of Mysore dhal in the first week of March was in the range of Rs. 124-200 and the price of a tin of fish is around Rs. 220-300 for 425 g. Therefore, it is nearly impossible to sell dhal and tin fish at a controlled price of Rs. 65 and Rs. 100 respectively. The consequences would be that either the sellers will stop selling these to avoid legal repercussions, which will hit the poor and rich both as they will have nothing to buy at the shelf, completely distorting the market, or sellers will continue to sell at a higher price, defeating the Government’s purpose.

A similar situation occurred regarding the controls imposed on face masks, and these are already no longer available at pharmacies. What the Government could have done instead is reduced the import tariff on both tin fish and Mysore dhal, as they have now belatedly done on face masks, leading to price benefits passed on to the consumer and ensuring supply. Can you believe we pay an approximate tariff of 35% on all imported tin fish?

On Thursday CBSL ordered to suspend facilities provided for import of motor vehicles and non-essential goods to defend our currency. This will again impact the poor and the needy the most. In this age vehicles are not only used by the high-income earners but the micro and small entrepreneurs to run their businesses. They will get impacted badly so as will their employees. Those who use SUVs will manage.

Time for global co-operation

Constant and confusing news feeds have combined to make us feel that as countries, we should isolate. However, this is a time we all have to come together as a global community. To overcome this economic impact, we need the rest of the world to recover from this pandemic and co-operate more to avoid future challenges. We need our suppliers based in other parts of the world to recover and to be back on their game for us to kick off our operations. We need the purchasing power for our products to be better, to move faster in European and American markets. Once a vaccine for Covid-19 is finalised by scientists with greater capacity than ours, we should be able to trade and purchase it for our people. This pandemic is a good reminder that in isolation we cannot face all challenges. We are now reminded of the importance of freedom and franchising our freedom with responsibility.

In combating Covid-19, China donated medical equipment to Italy and the US. It was said that a quote by Roman poet Anneo Seneca was included amongst those supplies: “We are waves from the same sea.”

In a similar fashion, Japan donated some medical supplies to China and it was reported that the following Chinese poem was written on the wrapping: “We have different mountains and rivers, but we share the same sun, moon, and sky.”

Let this Covid-19 outbreak remind us that we all are waves from the same sea, and we all share the same sun, moon, and sky.

We hope you're safe!

A message from Advocata:

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Hi, I hope that you, your family and loved ones remain unaffected by the pandemic we have at hand. Life is a collection of seasons. The good times and the bad. Unfortunately, we don’t get to choose what we want to live through. You’ve got to go through darkness to find light at the end of the tunnel. Beyond our current reality, the economic aftermath brewing in the next few months will make things more challenging, and we need to be psychologically prepared. The question is how are we going to face this, and how are we going to overcome the impact this has had on our lives, our businesses, and our economy?  When our survival is threatened, especially in the case of a global pandemic like the coronavirus which originated miles away from home, it’s so easy to question why the world is as interconnected as it is in the first place. We’re all self-isolating, social distancing and quarantining right now and with that emerges strong sentiments of anti-globalization, anti-interconnectedness, and pro-self-sustenance.  I hope we don’t get caught up in these sentiments, even after the threat of the virus is long gone. If Covid-19 has taught us one lesson, it's that we are now interconnected more than ever. From climate change to the ongoing crisis, it's more evident by the day that what one individual or country does, will affect the rest of us. In the same way, progress in one will also mean progress in the rest.  In the months since the novel coronavirus rose from a regional crisis to a global threat, countries have been advancing their research in science to find drugs and vaccines to treat or prevent the virus. We are thankful for these efforts, from the tiny island nation of Sri Lanka because a successful trial of the vaccine, means that the rest of us too can bear the fruits of this.  Chief Seattle said it eloquently a century ago, “Humankind has not woven the web of life. We are but one thread within it. Whatever we do to the web, we do to ourselves. All things are bound together. All things connect.” Closely connected and seamless global production networks made our lives better. Most emerged out of poverty and had access to better healthcare and economic benefits. This is a time we need to support each other and work together as a global community. We need to work towards the reactivation of factories, services, and economy, together.  We all are passing a real acid test of our public and economic policy. The impact of the decisions we make now, will last generations. Only time will tell us how strong we are together and the need to work as a global unit to address challenges that are yet to come.  We are waves of the same sea and though we have different rivers and mountains, we all share the same sun, moon and the sky.  Stay safe, our thoughts are with you and your loved ones.   Dhananath Fernando Chief Operating Officer, Advocata Institute. The Advocata Institute is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka.  Connect with us!