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The wonders of Asia and its economic discontents

2011-11-01 20:46:17
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It has become another wonder in Asia that when in the past the price of an oil barrel was varying between USD.89 - 93 and the price of oil in the world market decreased by 2 percent that such an increase has taken place. When the price of an oil barrel had risen to US$.98/- in the world market, the price of oil was reduced as it was the election period. Today when the price of oil is USD.92 in the world market isn't the price increase another wonder in Asia?While the budget is due to be presented only on the 21st, the price of a litre of petrol was increased by Rs.12/-, diesel by Rs.8/-, and kerosene by Rs.10/- with effect from Sunday midnight.  It has become another wonder in Asia that when in the past the price of an oil barrel was varying between USD.89 - 93 and the price of oil in the world market decreased by 2 percent that such an increase has taken place. When the price of an oil barrel had risen to US$.98/- in the world market, the price of oil was reduced as it was the election period. Today when the price of oil is USD.92 in the world market isn't the price increase another wonder in Asia?
In the past there were major corruption activities which took place in the Petroleum Corporation. The importation of substandard oil to the country resulted in a loss of 45 million and the hedging deal resulted in a loss of 5000 million to the Corporation. In addition supplying oil at a reduced price to the Kerawalapitiya power station and the internal corruption taking place within has resulted in millions of rupees in losses.  All these losses are burdened on the ordinary people. In order to cover the losses incurred the price of oil has been increased.  What happens next?  This results in vehicles used for public transportation such as buses, vans, lorries, taxis all raising their fares. This increase has a direct impact on the goods and services produced in the country. The end result is the cost of living of the people becoming more difficult to bear. The increase has taken place even before the budget has been presented.
In addition, it was stated by the Chairman of the Public Utility Commission of Sri Lanka that a price increase of electricity will occur next January. The inevitable result of the electricity rise which will definitely take place after the budget will not only affect the cost of living  but also increase the production cost of locally manufactured goods. There is intimation to say that there might be a salary increase in the budget according to the money allocated. The government expenditure will exceed by more than 25,000 million than last year which infers there might be a salary increase by RS.1000/- to all state employees.  But for the 6 million private sector employees there seems to be no redress which means the cost of living will affect them in a very grave manner.
We see that the country is being pushed to a very grave situation economically. Though the Governor of the Central Bank boasts that the foreign assets of Sri Lanka totals to US$. 8 million, however the net foreign assets are below US$.1 billion. Therefore to keep the stability of the rupee the government is forced to sell us dollars in the open market. Last July the Central Bank sold US$ 615 million to the banks.  The end result of continuous selling of US$ dollars in order to keep the stability of the rupee will only push the country further in to a grave economic situation. Especially with Sri Lanka's exports falling drastically and in contrast the imports increasing has resulted in a huge deficit between the export import balances. The government, instead of taking steps to stop the rupee value falling, should raise the interest rates and increase the taxes on imports to protect the economy from faltering.
In addition we see that the Colombo Stock Market has shown disastrous results. In the past there were over 6 million stock holding accounts but only 250,000 transactions have taken place. In reality a stock market grows if more and more investors enter the market. The Securities and Exchange Commission hauling some of the brokers before them and questioning/threatening them as to why they bought stocks from certain companies is like the commission acting as policemen. Some of the purchases done by the EPF and ETF have been from companies which had no value, resulting in a continuous loss by these two institutions. Stocks purchased from some companies have resulted losses to the tune of several millions. Eg; the share value of Grain elevators was around Rs.15/- about one and a half years ago. In the past 5 months the share rose to around Rs.75/- and in the last two months rose to Rs.258/-. The Employee Trust Fund purchased 5 million shares at the price of Rs.236/-. Now the current value is only around Rs.100/-.  By artificially pushing the share value of these small companies from the bottom to the top with the connivance of the Securities and Exchange Commission officials and like-minded businessmen the end result was the EPF and ETF selling these shares and the loss being bared by ordinary working class people. By these transactions these two institutions have loss several millions of rupees.
Taking into account these factors I infer that the next budget will be detrimental to the country and provide relief to the poor people of the country. The present government has no vision to rid the country of debt instead they hope to survive on debt-this is the wonder of Asia.


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