As the drift turns swiftly | Daily News

As the drift turns swiftly

Newly appointed Foreign Minister Ravi Karunanayake, barely two weeks into his job, is getting a sort of baptism of fire with several countries in the Middle East cutting off all ties and physical connections with the tiny country of Qatar, citing what they call its support for extremism and terrorism.

Saudi Arabia, Egypt, the United Arab Emirates, Bahrain and Yemen cut ties with Qatar on Monday, claiming the energy-rich monarchy is undermining stability in the region by supporting the Iran-aligned militant groups. Authorities gave Qataris living in and visiting their countries two weeks to leave. Later, Sri Lanka’s neighbour Maldives also joined them.

While one may immediately think of it as an internal problem of the Middle East, it does not much time for the ramifications to set in. More than 125,000 Sri Lankans are living in Qatar to the extent that almost every family in Sri Lanka knows someone who is in Qatar. Indeed, a total of nearly one million Sri Lankans live in Qatar and the countries that severed ties with Qatar, perhaps with the exception of Yemen.

From the point of view of a Sri Lankan Foreign Minister, the immediate concern would be about the welfare of our countrymen in Qatar. The sealing of the land border with Saudi Arabia would be a great obstacle for Qatar, which depends heavily on truck-borne goods and other supplies from the Kingdom. Once they stop, only sea and air connections will be available, but the latter will also be problematic as Qatar Airways now cannot fly to any of the countries that have severed ties. Moreover, Emirates, Flydubai and Etihad have also stopped flying to Doha with immediate effect and other airlines in the region are likely to follow suit. There has already been a run on the supermarkets in Doha and elsewhere, so food security is a real worry as Qatar has almost no local food production.

Qatari economy

If the ties remain severed for the foreseeable future (on the previous occasion when this happened, the ties were restored after about 14 months), there will be a huge impact on Qatar’s economy, even though Qatar is one of the richest countries in the world with a Per Capita GDP of around US$ 75,000. Petroleum and LNG are the cornerstones of the Qatari economy and account for more than 70% of total government revenue, more than 60% of GDP (US$ 167 billion in 2015), and roughly 85% of export earnings. Proved oil reserves of 15 billion barrels (588,000,000 m3) should ensure continued output at current levels for 23 years. On another note, it is scheduled to host the 2022 FIFA World Cup, a month-long international soccer tournament and the world’s most popular sports event.

But the problem is that Qatar is partly dependent on its Gulf neighbours for trade and transport and it will not be easy to realise any gains even from oil if the Saudi blockade continues. For the moment, some of the trade mechanisms are intact. Reports on Monday morning suggested that the Dolphin pipeline, through which Qatar sends gas to the UAE, is operating as normal. Qatar could also ramp up oil and gas exports to the rest of Asia, which would avoid the Middle East routes.

Even if there is no immediate impact, the Qatari economy could be hit hard, in the long run, affecting both local and expatriate workers including those from the Gulf Cooperation Council (GCC) countries. (Oil has already dropped below US$ 50 a barrel). The expatriates make up 88 percent of the 2.6 million population of Qatar. There could also be an adverse impact on remittances, since banks may not like to deal with the Qatari currency under the present circumstances. A forewarning of this came when banks at the Bandaranaike International Airport earlier decided not to deal in the Qatari currency, though this water later changed to an upper limit of US$ 1,000. This would have hit the expats who had returned from Qatar with Qatari funds.

Efforts are now said to be underway to de-escalate the tensions in the Middle East. Qatar’s foreign minister said on Tuesday Doha was ready for mediation efforts after the Arab world’s biggest powers severed ties with it, adding that Qatar’s ruler had delayed a speech in order to give Kuwait a chance to ease regional tensions. Sheikh Tamim bin Hamad Al-Thani spoke by telephone overnight with his counterpart in Kuwait, which maintains diplomatic ties with Qatar and decided to postpone a speech to the Qatari people as requested.

Sri Lanka should be watching these developments closely since any escalation of the tensions could affect our economy. Minister Karunanayake is no doubt aware that Sri Lanka has excellent ties with all the countries involved in this dispute and also some other countries such as Iran that have been mentioned in relation to it. This state of affairs should continue. It will also be interesting to see the impact on travel, though SriLankan Airlines has said there would be no curtailment of flights to Doha. A lot of Sri Lankans fly to Dubai via Doha and vice versa and this has essentially prevented that. Moreover, airline ticket prices have already gone up, since Doha is also a hub for travel to the US and Europe.

Another foreign issue that Minister Karunanayake must be watching keenly is the General Election in the UK which will be held tomorrow (June 8) despite a horrendous terrorist attack on the London Bridge and Borough Market. With the Conservatives slipping down the rankings, Labour has better prospects but it could very well go down to the wire. Regardless of who wins, Sri Lanka will expect to see a further improvement in the unique UK-Sri Lanka relationship that has stood the test of time. In the meantime, Karunanayake will be leaving for India this week for a series of bilateral meetings in his first overseas visit as Foreign Minister.

In an unrelated development, an agreement to provide an Indian credit line of US$ 318 million for the development of the railway sector was signed at the Ministry of Finance yesterday. Prime Minister of India Narendra Modi, in his first visit to Sri Lanka in March 2015 had declared a fresh Line of Credit (LOC) of US$ 318 million for the development of the railway sector in Sri Lanka. The Government of India has already provided four Lines of Credit for the development of railway sector in Sri Lanka through its EXIM Bank amounting to approximately US$ 966 million. These credit facilities have been used to improve the Southern and Northern railway lines and for the procurement of rolling stocks for the Sri Lanka Railways.

Cabinet reshuffle

Turning to domestic matters, there was a lot of speculation that some of the Ministers would retain certain institutions that were previously under heir purview before they were reassigned but now this looks increasingly unlikely. For example, the grapevine had it that Minister Ravi Karunanayake would retain the two lotteries boards and a few other institutions from his earlier (Finance) Ministry. There were reports that President Maithripala Sirisena was not in favour of this idea as it would create a bad precedent and also hinder work on the main new subject. It was intimated that he was not in favour giving institutions that were outside the scope of the assigned subject to any of the ministers. Prime Minister Ranil Wickremesinghe’s thinking is apparently no different on this issue.

The Gazette notification on the subjects and institutions of ministers is yet to be published and many ministers are still waiting in suspense to know what exactly is in store for them, institution-wise. No Cabinet reshuffle is ever going to please all the Ministers and they are bound to work within the confines of the gazette notification on their subjects and institutions. However, we have to wait until the Gazette comes out to find exactly who is in charge of which Government agency, also bearing in mind that the President and the Prime Minister also have some ministerial responsibilities.

The delay in allocating subjects and institutions has resulted in some unforeseen tangles within the establishment. The “room problem” between Ministers Lakshman Yapa Abeywardane and Kabir Hashim hit the headlines on Tuesday. This was not apparently down to any sort of personal animosity between the two men from the opposite sides of the political spectrum, but rather an issue concerning lack of room for the incoming State Minister Lakshman Yapa. It was reported that when he went to the offices of the Public Enterprises Development Ministry, most of the offices were still occupied by Minister Kabir Hashim’s staff. This has irked Yapa, who had left the place. However, a solution to this problem is likely to be found within days. But problems like this would remain until the subjects are gazetted.

Helping people in distress

The floods may have receded physically, but it is still reverberating in the political world. Deputy Minister Palitha Thevarapperuma has come in for praise on social media platforms and in the mainstream media for his honest intervention to help the flood victims. Many other politicians tried to follow the same path, but with some of them, it did not sound very honest because Thevarapperuma has a history of helping people in distress. According to one well-known anecdote, Thevarapperuma saw an accident happen on the highway and immediately set about transporting the injured to the nearest hospital. However, in order to accommodate the injured, Thevarapperuma had bundled his wife into the boot of the car had driven to the hospital at breakneck speed.

His wife suffered injuries as a result of this roller coaster ride and had to be treated at the same hospital. For Thevarapperuma, this was apparently all in a day’s work. There was another controversy when allegations surfaced on social media and gossip sites that some ministers and politicians were pasting their name on the flood relief packs given to the victims. This enraged many and the politicians mentioned were quick to stress that they had nothing to do with such a horrendous step. Minister Gayantha Karunatilake, against whom such accusations have been made, among others, said his political opponents were behind this move in order to tarnish his reputation among the constituents.

Many politicians also traded accusations on what caused the floods, with several of them citing the Southern Expressway as one cause. They have pointed out that the expressway runs through water retention and conservation areas, having not taken into account the concerns of environmentalists. However, many Opposition and Government politicians disputed this view, saying the expressway had nothing to do with the floods. Minister Patali Champika Ranawaka leads the former camp while Minister Vajira Abeywardane has defended the construction of the Southern Expressway. Minister Ranawaka took a few days off from his busy schedule due to the death of his beloved mother and politicians from all sides came to the residence to pay their last respects.

What is indisputable is that the floods have caused millions of dollars of damage to houses and other infrastructure from roads to schools. It will not be possible for Sri Lanka alone to foot this enormous reconstruction bill. Although many countries including India, China, Pakistan, the US, EU, Japan and Australia have already sent flood relief materials and funds to Sri Lanka, these would not suffice for the actual rehabilitation and reconstruction phase which should begin in due course.

Flood-hit areas

President Maithripala Sirisena has said that he will convene an international donor conference to coordinate assistance for rebuilding the nation’s flood-hit areas. He said that all international aid pledged so far would be used to rebuild the homes destroyed in the recent landslides and floods triggered by monsoon rains. The President toured several flood-hit areas and inquired into the needs of the victims. (There are around 21,000 families housed in 202 welfare centers with nearly 700,000 people affected).

There is a precedent for a donors meeting – the Sri Lanka donor conference held in Tokyo, Japan during the previous UNP Government (2001-2004) drew pledges of nearly US$ 4 billion from several donor countries for Sri Lanka’s development efforts. Although it might not be possible to raise such a large amount for reconstruction per se, foreign assistance on any scale will an enormous boon for Sri Lanka at this time when the economy is also facing other challenges ahead of Budget 2018, which is just five months away with a new Minister at the helm.

Minister Mangala Samaraweera has some good news in this regard.

The World Bank says economic reforms, International Monetary Fund programmes and resumption of European Union’s Generalized System of Preferences Plus (GSP+) will help Sri Lanka’s economy to accelerate to 5.1 percent by 2019. Sri Lanka’s growth is expected to pick up to about 4.7 percent in 2017 and accelerate to 5.1 percent by 2019, as The IMF-supported programme helps improve macroeconomic resilience.

This compares favourably with the region - Excluding India, regional growth is anticipated to hold steady at 5.7 percent this year, rising to 5.8 percent in the next, with growth accelerating in Bhutan, Pakistan, and Sri Lanka, but easing in Bangladesh and Nepal. India is expected to accelerate to 7.2 percent in fiscal 2017 and 7.5 percent in the following fiscal year.

According to the World Bank’s June 2017 Global Economic Prospects, reforms initiated by the World Bank Development Policy Operation in 2016 are expected to reduce obstacles to private sector competitiveness in the medium-term and help attract Foreign Direct Investments (FDI), which Sri Lanka must strive to increase. 


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