Cost of living high

With the recent relaxing of the rupee exchange rate and subsequent increase in fuel prices, trade unions and the opposition parties are conducting protest campaigns against the Government, demanding a reduction in oil prices and the cost of living. This article investigates the living conditions of citizens in the recent past and present, quality and expectations of life, prospects for improved living conditions and sustainment.

During the past few years, with the ending of the war, the people of Sri Lanka have enjoyed stable market conditions where the rupee was stable with the dollar; in fact the rupee appreciated slightly and prices of fuel, along with most commodities were stable. Even then the left-wing parties along with some trade unions made rumblings on the high cost of living and requested salary increases. For them, the sudden increase in fuel prices and other supplies presented an environment for a massive uproar.

The stable fuel prices people enjoy is quite a contrast to condition during the 2002/2003 UNP era, where fuel prices were adjusted every month with the world market and the arrangement was discontinued by the present Government. Has there really been an unbearable cost of living increase in the country? Let us look at changes in living conditions since independence.

Changes in living conditions

During World War II, the British administration introduced rice rationing, which continued as a subsidy even after independence. When world market rice prices shot up in 1953 due to the Korean War, adjustment in rice prices ended the tenure of Dudley Senanayake as Prime Minister. The price of rice became a prominent item in politics until J.R. Jayewardene’s era in 1977. Up to then the cost of living was generally stable; also people had a low profile lifestyle.

In the 1950s and 1960s, the common man lived in a small house lit with kerosene lamps, drinking water that came from the well and all bathed at the community well or at the nearby stream. Cooking was with firewood collected by the womenfolk, chillies and curry powder were ground at home. People consumed beef occasionally, fish was available only close to coastal areas, dry fish was popular and chicken was served during important occasions. Most slept on a mat laid over the floor, the common bed was strung with coir strings and few had a coir mattress.

Drive for industrialisation

The drive for industrialisation in the 1960s saw the appearance of rubberised coir mattresses. Radio became popular with the arrival of the dry cell battery (weighing nearly two kg), but the old battery had to be returned to get a new one. For refrigerators, only brand available was locally made Sisil, but purchase meant paying the full value and waiting for six months.

Electricity was available only in major towns and was fuel generated. Hydro power from Laxapana served only Colombo and power grid connecting cities continued into the early 1970s. Getting a telephone connection needed a recommendation letter from a Minister and availability of loops in the area. Then a Member of Parliament was paid Rs. 1,000 a month and travelled mostly by train.

In the early 1970s with the world fuel crisis, austerity measures were imposed by the Sirimavo Bandaranaike Government and among the regulations were banning import of potatoes, dhal, onions, chillies and fruits, clothing through co-operatives, wedding receptions limited to 100 guests (later increased to 150), house construction subject to a ceiling of 1,500 sq.ft. (later increased to 2,000 sq.ft.), restrictions on the transport of paddy and banning serving of rice in hotels on Tuesdays and Fridays. Restrictions on food imports brought unexpected income for farmers in the north who produced chillies and onions and smuggling from South India, especially sarees, became lucrative.

Consequent to increased fuel prices in world market, extraction of oil from marshes and shallow seas became financially viable. Oil producers became rich overnight and a new group of oil producers emerged from the North Sea to Africa. Every oil producer wished for fast improvement of infrastructure, which opened doors to development and resulted in a rush of foreign consultants and contractors. African and Far Eastern countries engaged only senior staff, but Middle East countries wished construction workmen at all levels, operational and household staff as well, whom Sri Lanka continues to supply.

Most restrictions on imports were lifted in 1977 by the J.R. Jayewardene Government with the blessings of the World Bank. The Government embarked on the Mahaweli Development Project, which opened thousands of acres for cultivation, moved administration capital from Colombo to Sri Jayawardenapura among others. Flooding of the market with imported goods affected the northern farmers who were suffering from the ‘Sinhala Only’ policy since 1956. Neglect of north of the country during his tenure saw the commencement of community problems, which led to 30 years of war.

The biggest surprise

Having endured the costly, long war which extracted a high human cost from both sides, devastated infrastructure and strained human bonds, Sri Lanka exposed the biggest surprise. The ending of war uncovered that most citizens in Sri Lanka live in decent houses with 95% having electricity and most with water on tap. The report by market research company Nielsen for 2012 informs that over 50% of households in Sri Lanka have some form of a vehicle.

A few weeks ago an international report informed that Sri Lanka’s extreme poverty is less than 5%, whereas in India the same stands at 35%. The same report informs that nearly 46% of men and 53% of women between ages 11 and 40 are overweight and are candidates for diabetics.

Now hardly anybody sleeps on the floor, except when constrained by space as in the slums. Entering into Colombo over the Kelani Bridge, one sees a sea of slums or the roofs of slums, but taking a closer look, practically each house is connected to an electricity supply pole, most with protruding TV antennas and with an occasional satellite dish.

Looking at lifestyles of today’s common man and women is a complete contrast to the 1960s. Firewood is out with gas taking over the kitchen, powdered chillie and curry powder are from the nearby boutique. More and more people are consuming food cooked elsewhere. Most houses have a radio, cassette or CD player and a TV. More than any time in the history, people are fed and clothed better, spend money in entertainment and take vacations (they call it a pilgrimages).

State service

By the late 1990s, Government employee numbers exceeded 700,000. The committee appointed to look into future of Government employees and salaries recommended a reduction of the cadre by 30% and corresponding increase of salaries.

In 2002, Ranil Wickremesinghe’s Government under the prodding of World Bank reduced the Government staff to below 600,000. The present Government boasts that they have managed to increase numbers to over 1,300,000. The country knows that despite the increase in numbers, vehicles, massive new buildings, air conditioning and telephones, efficiency of Government departments in fact became worse. Numbers of computers has not made any work faster or reduced the number of staff, public who visit a Government organisation knows nothing could be done without a bribe.

In the health sector the Government spends massive amounts in building and maintaining hospitals and on medical staff, but people prefer private hospitals and Government doctors who carry out private practice. In State schools every child is allocated a place where facilities and teachers are provided. But practically every student attends tuition classes conducted by the same teachers who supposedly taught them in school. More and more parents are fed up with State schools and prefer private schools.

Our legal system is so chaotic that mountains of cases are piled in court houses; our prisons are overflowing with prisoners as well as remanded persons awaiting trial, which are being housed and fed at State expense. The Income Tax Department seems to be unaware of owners of vehicles that cause traffic jams in cities and those who have massive houses on the roadside. Are they all owned by individuals earning less than Rs. 50,000 a month (threshold of personal income tax)?

State corporations employ hundreds of thousands of staff and not a single minister is interested to see them running profitably. The cost of running the Government is so high that it is reported that of every tax rupee earned by the State, 51 cents is spent on payment of staff salaries. A few weeks ago an editorial of a popular English newspaper reported that Ministers of our Parliament officially get a minimum of Rs. 200,000 per month in addition to millions some make in deals, not to mention the scores of vehicles at their disposal, vehicle permits, foreign trips and a pension after even a five-year term.

The question is, when the Government administration is so lethargic, expensive and when the majority of citizens do not carry out productive work, how did the common man achieve the luxurious life he enjoys, especially after a 30-year-long war? How about the private sector?

Employment and earnings

Up to the 1980s most of the country’s foreign exchange earnings were from the plantation sector – tea, rubber and coconut – whose acreages remained generally unchanged. Meanwhile, garment exports have soared becoming the largest foreign exchange earner. Large numbers of medium and small industries as well as service providers run by private sector cater to foreign niche markets. The Government is fortunate to have the foreign exchange remitted by our workers who are employed abroad. But our consumption of oil, vehicles and consumables are so high that we continue to run a huge deficit in foreign exchange.  

Our labour market has supposedly reached full employment. Everyone wishing can find employment, except in extreme rural areas where transport is poor. In suburban areas labour is so short that shops, workshops, and industries have boards outside requesting labour. Some garment factories offer a basic salary of Rs. 13,000 plus an attendance allowance of Rs. 3,500 in addition to transport and food during working hours. Even with these salaries, some companies are forced to conduct seminars in rural areas to fill their staff requirement.

Unemployed or unemployable are mostly our university-educated youth with degrees, but without marketable skills, who are hopeful of Government jobs. We also have a substantial percentage of women who idle at home who are not interested in working; the excuse is looking after children. Practically around every boutique there are a number of men hanging around, unwilling to do any productive work, mostly under the influence of illicit liquor or drugs.

We also have 350,000 three-wheelers most often parked at every small road junction waiting for a hire. For well over 75% of the time they idle and quote exorbitant charges from their customers for their flamboyant lifestyle. While waiting they are also amendable to other means of earning money.

Construction and tourism sectors

In the construction sector, productivity has increased mostly due to usage of machinery for the  excavation of earth, cutting and bending of steel, concreting and hauling up of materials, which have become machine intensive. In paddy cultivation most manual operations have been replaced by machinery, converting the farmer into a manager who organises different operations. Usage of machinery has enabled paddy farmers to overcome shortage of labour and bring down the cost of production. But in vegetable cultivation, except for watering using pumps, other operations have remained unchanged.

Tourist arrivals have improved; however most hotels are old and need expensive refurbishment. New hotels take two to three years for construction and profits to pay back investment would take a further length of time. When the costs of the Colombo South Harbour went up, the local investor pulled out due to long delay in payback of investment. Construction of expressways takes years and until opened to traffic they do not provide return on investment. Meanwhile the Hambantota Harbour, constructed and opened at a massive cost, continues to idle.

Lavish lifestyles

It is well known that our export earnings and worker’s remittances from abroad are not sufficient to pay for oil, vehicles and increased imports. Government income is barely sufficient to cover the basic expenditure and all development costs come as loans. Individuals and companies buy vehicles, put up massive houses and buildings with expensive finishes, all with borrowed funds. The Government runs on local and foreign loans; most companies as well as the masses are indebted.

The question remains, with so much of wasteful expenditure in the State sector and when the majority of citizens do not contribute sufficiently to production, how can its people afford to have a lavish lifestyle? Is it possible for a few companies in the private sector and the informal sector to continue shoulder the economy and for how long?

A few weeks ago, two friends’ brothers living abroad for over 20 years, one in USA and other in UK, while on holiday in Sri Lanka, discussed hardships they encounter in their daily life. One exclaimed: “You fellows here have so much of holidays, full employment and are having a wonderful time. May be the West has something to learn from Sri Lanka.”

(The writer is a Chartered Civil Engineer who graduated from Peradeniya University and has been employed in Sri Lanka and abroad. He was General Manager of State Engineering Corporation of Sri Lanka and left the position in February 2010. He is presently employed at a Chinese construction organisation. He also ran a manufacturing and a sales organisation for over a decade.)