Dr. Harsha takes on Budget 2013

A few selected people have captured both political power and the economic decision-making process in Sri Lanka in order to transfer wealth and wealth-creating resources to them, alleges United National Party (UNP) Parliamentarian and economist Dr. Harsha de Silva.

Airing his views about Budget 2013, Dr. De Silva points out that everything and more the mafia wanted was granted to them through the Budget. He claims Sri Lanka is just doing what the white collar criminals did in other countries. “Making money by capturing the regulator is no great achievement. It is in fact the most disgusting way to make money,” he stresses. Following are excerpts from the interview:

Q: How would you describe this Budget?

A: I am going  to call this a system beyond the Budget of the 0.1% by the 0.1% for the 0.1%. What you are seeing in Sri Lanka is similar to what we have seen in many places around the world. In countries like Europe, Tunisia, and the Middle East, we have seen concentration of wealth among a very few people.

We are seeing something very similar in Sri Lanka; that a very select few people have captured both political power and the economic decision-making process. By doing that they are able to bring in legislation either through the Budget or other methods, where wealth and wealth-creating resources are transferred to them.

Take the Expropriation Bill for instance, where they took the assets of various people and gave them back to this 0.1%. The hotel in front of Temple Trees is a good example. Instead of paying the depositors the money, the hotel was undervalued and transferred to an unheard-of company, just established a few months ago run by this 0.1%. If we look at the Budget, taxes are imposed on various consumer items, but tax benefits are given to the ultra rich belonging to this 0.1%.

From the racing car duty waiver to the ability to bring money into stock market outside the accepted declaration procedure or letting certain people borrow overseas up to 50 million dollars and specifically the tax reduction for approved sports events with retrospective effect going back to August for people to sponsor programs on a particular channel owned by a member of the extended family – all these shows a nice cosy relationship being built among the people in this 0.1%. The benefits are accrued to them.

This present situation is going to create social disharmony. People are going to get frustrated. It is going to be no different than the abuse of power by the dictatorial regimes that got caught up in Arab Spring and the blatantly corrupt and invasion regimes of Europe and the cowboys that created such chaos in America, which ended by creating global crisis.

What I see beyond this Budget is that if you continue to study the decisions and the policies of this regime, they are clearly lopsided and beneficial to those who have captured both the political and economic systems of this country.

Q: Despite predictions by the Opposition, there was no heavy burden on the common people through the Budget. Do you agree?

UNP Parliamentarian and economist Dr. Harsha de Silva

A: Taxes are not raised by the Budget in this country. Taxes are raised by text messages. There isn’t a single price increase in the Budget. Today the Budget is a political statement, more than a responsible financial document. What the Opposition warned has certainly happened. I myself said that prices of goods will go up, it certainly happened. I also said that electricity and fuel prices will go up; and they will certainly go up.

In the Budget speech it is indicated that there will be an increase in electricity prices. Unfortunately it is hidden in such a manner it has not been highlighted. I believe this electricity price hike will take place in January. One of the first legislations they will bring to 2013 sittings will be the Electricity Amendment Act, which we haven’t seen yet. Under this act what will happened is that the pricing of electricity will be moved out from the Ministry to the Public Utilities Commission. Once that happens it will be like Johnston Fernando saying, ‘we will be taking them to courts because they increase prices’. But the Consumer Affairs Authority gives them the approval to do so. Likewise, the PUSL will give the go-ahead to the CEB to increase the prices. The Government will try to wash its hands off and say that it wasn’t them and was some international conspiracy that increased prices of electricity.

Price increases are happening. This Government is taxing tomatoes, onions, and potatoes at 12%. Where on earth does this kind of taxing take place? But the 0.1% seems to be getting away with blue murder.

People have been asking the Government to gazette the cost of living allowance. But they haven’t done that. If you look at what the people are asking for, how little of what they are been asking for has been given? This is creating inequity in society. People who work hard don’t see a bright future for them.

In economics, there is something called ‘Reveal Preference’. According to this theory, one doesn’t say this is what they prefer, but through actions the preferences are revealed. When we have some 20,000 people trying to escape to Australia, that is the Reveal Preference. Their preference is not to stay in Sri Lanka. They are trying to escape; they are getting into boats at night and paying huge sums to smugglers because they don’t want to stay in this country. Why are people so eager to escape from this paradise?

If this is a middle income country, we have to rank ourselves with middle income countries. Not with countries like Bangladesh. We don’t want to just survive. We want to do bigger and better things. Ask the middle class of this country whether they are able to do that. Are they able to live a good life and save money at the same time or are they living off their credit cards?

The per capita income of this country is fabulous. All the billions of the manipulators at the stock market are in this per capita income. But there is a huge problem as you go down the road. Because, for instance, this calculation takes into account all the bribes, commissions, and the unproductive and unfair gains by this 0.1%. This does not create any value.

What happens in situations like this is that instead of what is reported as the increasing wealth of citizens of a particular country and the actual wealth of the citizens of the country converging, they are diverging. Some of the countries that went into chaos had very high per capita GDP. But lot of people didn’t have enough income to meet their basic needs. The more the 0.1% takes for them, the greater the lie of true development.

Q: A significant feature of the Budget is the measures taken to develop capital market. What are your views about this move?

A: The capital market people said they were ‘ecstatic’. That is the exact word they used. Everything and more the mafia wanted the mafia got it. Now the doors have been opened to bring the illegal money into the market. This essentially means that one can steal locally and deposit it in a bank in tax haven countries and then bring it back into the country. When you look at where most of the investments are coming to the capital market, they are coming from tax haven countries.

For instance, who is Krrish? At 90 million rupees an apartment, can you sell four towers of 80/90 stores? Where is this money coming from? Whose is this money? Who is Manivannan? He is listed as one of Sri Lanka’s greatest industrialists with Don Carolis and Upali Wijewardena. But I have never heard of this person. Now encoding a part of a 320 million dollar satellite to benefit a very close family member of the regime to be the first astronaut. Is this what people want? Isn’t this catering to the 0.1%?

The mafia will be ecstatic. The mafia has captured the regulator. This is what happens even in America. We are just doing what other white collar criminals did in other countries. Making money by capturing the regulator is no great achievement. It is in fact the most disgusting way to make money.

The mafia of the stock market figures prominently in this 0.1%. If Nalaka Godahewa doesn’t like that word, that is his problem. Because the word didn’t exist until all of this happened. And it is his predecessor who started using this word. Where are the so-called good days pointed out by the mafia propagandists?

Q: There has been a lot of criticism against the tax cut for racing vehicles. But the Government claims the move was to develop sports economy. Don’t you agree there is a need to find new avenues to develop the ailing economy?

A: We know about these night races. Who is behind these night races? Who is sponsoring these night races? Whose television channel is telecasting these races? For whose benefits are these night races? This is a custom built piece of legislation for a particular group of people. There are much bigger things that this country needs to worry about. As a responsible Opposition we will bring up these issues.

According to the President of the Motor Trading Association, a four-wheel farm tractor has gone up by Rs. 500,000. A Maruti car has been gone up by Rs. 200,000. Funeral cars that used to be tax free are now imposed with a tax. These are regular people in this country and they are being taxed for a selected people to enjoy a tax cut on racing cars. I don’t see any equity in this tax structure. We should never forget that these are all custom built to benefit the 0.1%.

Q: The Budget points out achieving 8% GDP growth and single digit inflation and many positive indicators. How possible it is to achieve these numbers?

A: This country’s potential is far more than what it is achieving now. I believe in this country. Unlike some of these people who are clad in a full white national suit and wear a sataka around the neck, I don’t have dual passports. I have only one passport. I live here and work here, and I will die here. When I criticise, people make various allegations that I am a traitor. I reject all those baseless allegations. I believe that the only way to ensure that this country can be developed for our children is if we have a sustainable plan going forward. Otherwise it will crash.

Abraham Lincoln said that ‘government of the people, by the people, for the people, shall not perish from the earth’. I fight for that social equity. I have given up lot materially to fight for this cause, which I believe in. What I want to gain for the people is a far bigger reward. I am not happy with the progress this country is making, because we are knowingly creating conditions for social upheaval in this country.

Lord Buddha has said that rulers must plan an economic system that will eradicate poverty. Here we are not talking of a directed Marxist-based plan, but an equitable platform where individuals can succeed; and the Government should ensure that there is good governance, regulations, and rule of law, so that everybody has a fair chance. And those who are unable to make it are looked after by safety nets set up for them. I don’t think this is where it is going.

There is more and more hatred, frustration, and jealously building up in society. Society is getting polarised. There is no respect for the powers of checks and balances. There is an Executive, there is Legislature and there is Judiciary. Those three have to work together. But they want to take control over everything. They want to create this super powerful group who will run this country immaterial of what anybody says.

Q: If there is such dreadful situation in the country as you just described, as the main Opposition don’t you have a bigger role to play to put the country back in the correct path?

A: Technically the Opposition is weak. Because the Government has two-thirds and the Opposition has only one-third. But if you think the amount of pressure we bring on the Government on issues ranging from the independence of the Judiciary to the manipulation of ETF money in the stock market to healthcare to education, the Opposition has been fighting.

It is the State, using its enormous power to that they have unconstitutionally appended, that is a mission to destroy the Opposition. The Government is trying to disrupt and destroy the Opposition. There is this gigantic operation that has been detailed to destroy everything that is standing in the way of moving towards this objective of capturing in totality political authority and the economic decision-making system. It is in that context that we have to stand up and fight. It is very difficult but we do not want to give up.