EU Hybrid Wars & Financial Ratings
Published in Uncategorized. Tags: Anagarika Dharmapala, April Terror, Assembly, Barbados, Bond Scam, Central Bank, Communist Party of India, Daintee, EU, European Union, Fitch, Global Financial Crisis, Hybrid Wars, Leverhulme, Machine Tools, Moody's, Planters Association, Ratings Agencies, RCEP, S&P, SEC, Singaravelu, SOEs, Subprime, Sunday Island, Sunshine Holdings, TRCSL, Unilever, Vaccine, Venkat Narayan, Watawala Plantations, World Bank.
ee archive: eesrilanka.wordpress.com
“Before you study the economics, study the economists!”
EU Hybrid Wars & Financial Ratings
e-Con e-News 15-21 November 2020
Capitalist public media hides the real plans of the capitalists and spread diversions to promote division among people. They choose diversions by the phases of the moon. This week it was forests, before that burials, then there’s the April Terror investigation unending, and the occasional Bond Scam lament thrown in.
ee examines corporate reactions to the budget: For example, Sunshine Holdings (owner of Watawala Plantations) rails against the measly basic wage increase for plantation workers. They fear other workers too will now want increases. This throws historical light onto how the labor-intensive plantation system drives everybody’s wages down. Is Sunshine a Unilever front? Their subsidiary Daintee claims a distribution network of 90,000 mainly rural outlets! Talk about capturing the home market! (see Random Notes)
• President GR asserts we can learn from China’s economy – hopefully their ‘Made-in-China 2025’ goal. China sets up a manufacturing plant to make tyres using local rubber in Hambantota. Then here comes the EU: accharufying ‘concerns’ about human rights, threats to gang up against Sri Lanka at their alpine UN resort in Geneva, and warning against import restrictions on their expensive machines.
Always-Brexit England then plays good cop, adding Sri Lankans to their ‘travel corridor’. Who wishes to go to London at this wintry Covid hour? Do we wish them to infect us here?
“Trade is not a one-way street”, the EU sermonizes. Well, it’s the EU, and now master the USA, that forces our dependence on their export markets – reproducing the colonial plantation import/export game, while handing over our home markets to their machines and FMCGs. At the same time, the clamoring against the porous import controls on cars is mere whitewash. The purpose being to prevent and not even think of local modern industrial production. (see ee Sovereignty, Hybrid War)
• White comes in more than 50 shades these days. From Biden’s pasty pastel to the solarized orange of Trump, to the tinged beige of a Kamala and Obama, to even Blacker tans. But it’s not a matter of pigment alone. To act the white master or shaded sahib one needs to issue threats, sanctions, judgments and ratings, let alone unleash bomber/parippu squadrons. This comes from countries, corporations, UN and NGO stipendiaries. The last week saw the UN resident splutter on burials, a has-been Irish politico make racialized and blasé compare between the settler US, and Africa and SL, and the EU melanging human rights with malice against feeble import controls.
‘Hybrid warfare is a military strategy blending political warfare with conventional warfare, irregular warfare and cyberwarfare and other persuaders, such as fake news, diplomacy, lawfare and foreign interventions.’ (re: Hybrid Wars, watch: youtube.com/watch?v=D-uxISFZbG8)
• Midst all this spite, we felt limited pleasure (unless we’ve got it wrong) in the Central Bank asking banks to use CB forecasts and projections published by them, and to “shun forecasts of the IMF, WB and the likes” (as reported by Her English Majesty’s fog-machines in Colombo: Daily Mirror, et al)
Why are the rating agency Fitch’s metrics so popular with the media? Is it their umbilical link to Capital Media that owns Echelon and EconomyNext? Who in turn parrot US State Department policy?
This ee looks at the history of the 3 ratings agencies, constantly shoved in our faces: Moody’s (aka ICRA), S&P, Fitch. These big three were provided a monopoly by the US government to rate bonds. Talk about state-guided missiles! They’re by no means neutral umpires. They are paid by foreign bankers who issue and back bonds – most certainly a conflict of interest. And these agencies fully promoted the 2007 meltdown.
In 2007, a nervous Colombot financier offhandedly asked, “What on earth are subprime mortgages?” They asked this question not because they thought the respondent knew economics; they thought it was an English language problem, for they were about to lose a load of money.
The GFC – the Global Financial Crisis – as that ‘meltdown’ was eventually called, was blamed on ‘subprime’, just as much as this current meltdown is being blamed on Covid.
But was that 2007 GFC really because they tricked impoverished Black people into buying homes, who then could not afford to pay their mortgages? Was it because people were living beyond their means? It’s not Covid, it is Capitalism. Capitalism is at this stage of monopoly and financialization, where consumption and accounting matter more than production. Ever more frequent and inevitable breakdowns are ingrained in capitalism’s DNA.
The GFC was not an accident, banks and ratings agencies knew beforehand but continued with their superprofiting, inflating an economic bubble and then triggering its collapse… (see ee Focus)
• Telecom corporations are also making a killing off Covid, so it’s heartening to read, the regulatory TRCSL rushed in to provide children in Baduraliya with connectivity. Yet how much profit are telecom companies making in such areas, and how are parents paying for it? Again, where are these profits being invested? In those children or in fancy car imports, again?
• Colonies are not allowed to declare an independent and modern industrial plan or foreign policy. One letter to ee laments the budget has no mention about machine tools, and asks if all ee does is dream and vend theories? When the merchant trader fast-buck mentality is wholesaled by the education system and media, what can a nanoscopic ee accomplish to spark a national conversation? So what about “Machine Tools – the machines nobody knows?” Neither the EU nor the US want us to know. The capitalist import/export media here would never dare tell. (see Random Notes)
A1. Reader Comments –
• Anagarika & India’s Communist Party • ee’s Archaeology • Have We Missed the Industrial Bus? • Vaccine Auctions • What about a State Ministry of Engines? • Institute for Modern Machines? • No Plan? Only Plan to Pay Debts? • Tax Evaders, Please Come Back • Debt Keeps Rolling along • ee & Debt Traps
A2. Quotes of the Week
• EU Hybrid War & White Devils • Sri Lanka, China and, Bolivia • China’s SOEs
A3. Random Notes –
• Machines Nobody Knows • US Tool Builders • Budget to Assemble Foreign Cars • Capitalist Media & Diversion • Sunshine, Pandora & Wage Increases, • National Development Bank? • No Media on World’s Largest Trade Deal • From World Bank Archives
B. ee Focus
B1. The Devils are Here – Why They Love the Rating Agencies
C. News Index
A1. Reader Comments
• ee thanks Readers who send articles of interest. Please excerpt or summarize what is important about any article sent, or your comments, and place the e-link at the end. It’s better to email.
• Anagarika Dharmapala influenced one of the founders of the Indian Communist Party! Tell that to the Colombot haters! Check – en.wikipedia.org/wiki/Malayapuram_Singaravelu
• “I don’t understand how ee’s able to dig up highly relevant pieces on any topical topic eg Barbados.”
• “So true the fact that industrializing was always sidetracked. Haven’t we now missed that bus?”
• “Yahoo and other internet giants have started to promote this vaccine issue. It may be someone is trying for a quick buck before others come on to the market. The 2 vaccines said to be effective (through the press releases of the Companies) are both marketed by US companies. One of these vaccines is said to cost US$74 for the 2 doses and the other $40 for 2. This will be in addition to the huge costs of maintaining the cold chain in temperatures colder than on Mars. Hopefully they can sort out both the costs and storage issues quickly. We still do not know how long their immunity will last. Imagine the cost of vaccinating 15 million every 2 years at $40 per person! It’s funny that we do not hear of the other 12 or so vaccines that are on the final lap: 6 of are Chinese, one is Russian, one Indian. Sarath Fonseka was said to be criticizing the government for not paying whatever billions it costs, for paying in advance for a ‘UK vaccine’ – as the English Government has done.”
• “Why doesn’t the budget talk about state research & development to make machines? I was expecting funding to produce local engines. Hell, we should even have a State Ministry of Combustible & Alternative Engines! They have no plans at all to produce machinery. Their most industrial plan is to assemble automobiles with imported parts. A lot of the tax cuts are to allow capital goods imports. The plan is to import tech to improve agriculture yields and manufacture some basic pharma.”
• “Do we really need to spend immense money on roads and planting trees when we could have taken that and built a damn state-of-art research institute for modern machinery with technical assistance from China?! Roads and trees can wait a few more years!?
• “Can SL really pay off its debts? Has any poor country, other than the USSR and China, pulled it off? I understand borrowing for growth, but we’re borrowing for consumption. Has anyone calculated how much money we’ve paid in interest, penalties etc re: debts since independence? Basically, we got no Plan other than the PLAN to pay debts! Capitalists are like credit card companies – don’t like when people pay ontime. Never paid interest to credit card co’s cuz I pay always on time AND in full! But damn friends paying interest, constantly getting credit limits upped! – like: WTF!? (ditch the cards!) Does SL really need to pay debts? The modern economy runs on debt. We can keep rolling it over?”
• “Sunday Island has an article by Indian journalist S Venkat Narayan (probably instinctively anti-China), about Kenya owing China large debt. I was wondering if e-Con e-News might report its own response to these now recurring accusations, seeing they may also relate to the SL-China relationship?”
• “In terms of debt to China, ee should base its argument on the differing structural nature of the debt: eg, China lends largely towards productive infrastructure, not for balance-of-payments issues (ie, commodity imports). There are no political conditions (ie, structural adjustments) which end up deindustrializing the country. These arguments have more substance, than constantly saying only 10% of our debt is to China, because that % will grow. We also have to look into the comparative cost of Chinese contractors and consultancy vs those from the US and EU, since loans have conditions to that effect. ”
A2. Quotes of the Week_
• “The Delegation of the EU and the Embassies of France, Germany, Italy Netherlands, and Romania… statement yesterday slamming the government’s trade policy, with an obligatory non-sequitur to human rights… is a declaration of hybrid war. If any sleepwalking human rightist needed one last wakeup call as to the true agenda of white devils feigning concern for human rights: this is it.” (see ee Sovereignty, EU Mixes up)
•‘The manner how Leftwing and Centre-Left governments elected in South America in the recent past handled their relations with China is illustrative of this new possibility. Countries like Bolivia, Venezuela and Brazil under Lula de Silva successfully struck deals with China in order to finance their industrial and welfare schemes. These resources were of immense importance especially for countries like Venezuela and Bolivia that were under the sanctions of the US. This does not mean Chinese investments in foreign countries are flawless and perfect. Activists have raised issues regarding the impact of Chinese investments on local environmental and labour conditions. However, instead of becoming Sinophobic and siding with the west uncritically, what is preferable for 3rdworld countries is to use the space created by the collapse of unipolarity to their benefit – and to engage and bargain with China in a collective fashion regarding issues and lapses associated with Chinese overseas economic activities.’ (see ee Sovereignty, Problem of ‘neutrality’ in foreign policy)
• “In Dec 2006, the head of China’s SASAC [State-owned Assets Supervision & Administration Commission] announced SOEs would maintain ‘absolute control’ over 7 strategic industries (military industry, electrical power generation and grids, petroleum and petrochemicals, telecommunications, coal, civil aviation, shipping) while keeping strong influence over other pillar industries (machinery, automobiles, information technology, construction, steel, nonferrous metals). Through a series of government-directed mergers, a handful of large-scale enterprises came to dominate these key industries, protected from private and foreign competition and investment. As a result, the scale of total SOE assets increased rapidly; between 1999-2008, the average total assets of industrial SOEs – including those at the local, provincial, central level – increased 589% to more than $135mn per enterprise, while the average assets of industrial non-SOEs in China increased by only 67% to under $9mn per enterprise.”
– Sean O’Connor, SOE Megamergers Signal New Direction in China’s Economic Policy
A3. Random Notes (‘Seeing Number in Chaos’)_
Machine tools are “the machines nobody knows”. They may appear to be a small part of an industrial economy. Yet they are at the heart of the industrial health of a nation. The machine tool industry has a crucial link to the economy and to power. It is at the centre of all manufacturing. A machine tool is a powered device, not hand-held, which cuts, forms or shapes metal, wood or other materials. Few people know of lathes, milling, drilling, grinding machines. They are the ‘mother’ or ‘master’ machines. Every manufacture, from parts for chips to warships, is made either by a machine tool, or a machine made by a machine tool. Machine tools reproduce themselves…
US tool builders were the most productive in the world in the 1960s, but the capitalists had grown afraid of the power of their skilled working classes, and resorted to their usual bag of tricks, anti-communism, union-busting, outsourcing, moving factories to the US South, where there were no labor regulations, hiring untrained farm boys, and then to Mexico, and East Asia.
In the 1960s, the US capitalist class formed huge conglomerates, but 100s of mergers fell short. The 1970s also saw deindustrialization in the US and elsewhere. By the 1980s, profits were growing from accounting not production. The decline of local US manufacturing was linked to the erosion of their machine tool industry…
• The budget this week has provided tax cuts to allow capital goods imports to assemble foreign cars here. Assembly and manufacture is not modern industry, it is primitive. Is it more cars we need? They will keep importing technology to improve yields and manufacture pharma. But no plans to recapture the home market from Unilever and set up rural industry. And certainly not to make machine tools. Meanwhile the media keeps up a din against import controls.
• The main function of the capitalist public media is to hide the real plans of the capitalists and spread diversions to promote division. What the Daily Mirror, FT or EconomyNext hates about the budget, we like, and vice-versa. We also have to fill in the mighty white blanks in the coverage:
Take this news item: “Government opening Pandora’s Box with plantation wage”, warning “other trade unions may be tempted to get salary hikes included in budget.” This is from the head of Unilever-linked Sunshine Holdings (Daintee, with distribution network of 90,000 mainly rural outlets!, Watawala plantations, etc).
Here’s another headline: “Productivity-based model would benefit plantation workers vastly.” Not one plantation worker or a trade unionist is interviewed. Instead the Planters’ Association, a clique again dominated by MNC Unilever, steering the economy for over a century and a half, suddenly spins fantasies about how workers could earn more than the Rs1000 a day, which they had all along opposed!
The news just repeats over and over again Planters’ Association lies that tea estates are loss-making and wage increases will ruin the industry. Low wages here are blamed on workers themselves, and the news dares not mention: it’s mechanization of tea cultivation in Kenya and Japan that tremendously raised productivity. Surpluses generated are not invested within the sector but wasted on conspicuous luxury consumption and speculative investments; the planters coupled with licensed export firms deliberately stagnate production forces and therefore maintain the colonial mode of exploitation, even in the absence of colonial rule. (see Plantations Mafia & the Political Path of Workers’ Struggle – ee 17 June 2019)
It is true that we have a predominance of labor-intensive sectors of production, where a wage increase has a substantial impact on production costs. But the most important issue is why Sri Lankan capitalists refuse to invest in technology going beyond the labor-intensive. Why does Unilever invest its profits in England, in eg its Leverhulme Research Centre for Functional Materials Design? Don’t we own a part of it at least after 150 years?
Instead we are repeatedly told: Unilever Sri Lanka, “one of Sri Lanka’s largest fast-moving consumer goods companies” has “256 products covering 14 Unilever brands such as Sunlight, Lifebuoy, Signal, Lux, Pears Baby, Sunsilk, Wonderlight, Lever Ayush, Close up, Dove, Clear, Glow & Lovely, Ponds and Vaseline, manufactured at the Horana-based facility, produced under ISO 9001 certification” of the Sri Lanka Standards Institute (SLSI). What does this ‘manufacture’ mean? Packing? And do Daintee’s 90,000 mostly rural outlets, also distribute them?
• There was scant coverage about the budget proposal for a National Development Banking Corporation, merging multiple small state banks. Some responded,”Don’t get excited, it’s not a proper development bank, but a housing and property development bank”. Others: “We won’t know the full function of the bank until the merger is done with a proper legal framework.” Let’s see if Unilever, Standard Chartered, Citibank or HSBC get to assassinate anyone or throw someone out of the cabinet like in “the good old days”, before this development bank is allowed to help one cultivator or worker.
ee also notes there was little English saturation coverage of the largest trade deal in the world: the Regional Comprehensive Economic Partnership (RCEP) free trade agreement last week between the 10 member states of ASEAN – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, and 5 of their FTA partners – Australia, China, Japan, New Zealand, South Korea. Such is the white media.
• Leverage for what? 1975: Sri Lanka’s performance still “disappointed [World Bank President] Mr McNamara very much”; “Mr Knapp asked whether Sri Lanka’s access to Arab and Iranian money was undermining our leverage” Knapp added, “Consortium contributions to Sri Lanka were ‘giveaway money’ which the Bank should not do.” [from George Zaidan to John H Adler, “Meeting of Review Group: SL” May 25, 1975, with attachment “SL Country Group Review Meeting”, May 21, 1975. JB Knapp had been on the Federal Reserve Board and in the State Department, a member of the inter-departmental committee to prepare the Marshall Plan, economic adviser to the first US delegation to NATO in 1950-1. In 1952 he joined the World Bank as director of its Latin-American operation, and in 1956 was appointed chairman of the WB’s Loan Committee. Zaidan was Division Chief, Population & Nutrition Projects Dept, WB. Adler was Director of the WB’s Economic Development Institute.]
B. Special Focus_
B1. The Devils are Here: Why they Love the Ratings Agencies
• ‘Rating Agencies S&P and Moody’s are given privileged access to books and boardrooms of companies, as well as to finance ministries and central banks. Yet their highly rated banks and business kept crumbling under the Asian region’s 1997 financial crisis. Executives in the firms affected claim they sent clear signals but these did not appear in ratings. Moody’s top manager: “An institution run by a bunch of bureaucrats who couldn’t run a corner candy store is not necessarily a bad credit risk.” What matters is willingness of governments to intervene and bail out management teams who may be dumbos. A high credit rating does not mean that a company or bank is well managed. It means, despite “bad managers, lax regulations, corrupt lending practices and other maladies: credits will be paid because governments will use public funds to bail them out.” Rating agencies do provide another measure called ‘financial ratings’, what an agency thinks about a company or bank’s actual management and operation. But investors do not consult these ratings.’ – Jeffrey Winters, The Determinants of Financial Crisis in Asia
What is a bond? A bond is a certificate issued by a government or public company promising to repay borrowed money at a fixed rate of interest at a specified time.
• Who is doing what? Who owns what? Who is borrowing? From where? And for what? How well are profits being made? Who is being bailed out? Who is being protected? Who is being subsidized? At whose expense?
There was a time when obtaining a loan from a bank was said to be a rigorous process: The bank would verify if the borrower provided a plan to properly invest the money and would repay. It was supposed to be only loansharks (usurers) who would entrap a person in debt and then bleed them dry. Like drug pushers handing out drugs for free to get people hooked, and then get them to pay by hook or by crook, until they overdose. The truth is that capitalism always profits off the greed of the lender and the extravagance of the debtor.
Adapted from The Devils are Here: the Hidden History of the Financial Crisis by B McLean & J Nocera’s exposé, Chapter 8:
‘Standard & Poor’s, Fitch Ratings and Moody’s profits came from gauging the chances that a bond would be repaid on time and in full. They use a series of letter grades called ratings. The highest “investment–grade” rating, triple-A, means the bond has the same risk of default as a US Treasury bond: almost none. Bonds rated double-A to triple-B minus are also investment grade – riskier than triple-As, but still safe enough for widows and orphans. Anything below a triple-B minus was a “junk” bond, considered too risky to be bought by pension funds and other institutional investors legally bound to hold only safe investments.
Bonds don’t trade on public exchanges, and information about them is tightly held by investment bankers and traders trying to sell them.
In the 1970s, rating agencies, which had depended on subscribers, started charging bond issuers directly for ratings. Many investors do not buy unrated bonds. Subscriptions were optional, but a rating had become mandatory for issuers. The rating agencies now had an obvious conflict of interest: they were now being paid by bond issuers, with rating agencies beholden to the same people whose bonds they were rating.
Then in 1975, the US Securities and Exchange Commission began to use ratings to determine how much capital broker-dealers had to hold. The higher a bond’s rating, the less capital the broker–dealer had to hold against it. This made ratings even more important. But whose ratings could count toward reducing capital? The SEC decreed an oligopoly of three: Moody’s, S&P and Fitch would be nationally recognized statistical rating organizations (NRSROs).
The business of rating bonds was immensely profitable, but not superprofitable. But then the three agencies began rating – not just corporate and government bonds – but “structured financial products,” a Wall Street euphemism for mortgage-backed securities, etc.
The bond traders who helped invent the mortgage-backed security in the 1980s, pushed to get the rating agencies involved, to make investors comfortable. Investors understood what ratings meant, and Congress and regulators had trusted them by designating them as NRSROs. The law allowed investors who weren’t supposed to take much risk – like pension funds – to invest in certain securities if they had a high enough rating. The traders next hooked Fannie Mae and Freddie Mac, because they were government-sponsored enterprises and the federal government would always bail them out.
This ‘structured finance’ business of the agencies began booming faster than their traditional bond rating business. Structured financial products of course needed “high” ratings. An asset-backed security took low-rated assets and somehow rated them Triple-A securities, that could be bought by investors like money market funds and pension funds, and used by banks to reduce capital requirements.
Financial magicians started bundling low-risk assets with high risk assets to enable high ratings. In 2007, only 6 companies had a triple-A rating. But then came mortgage-backed securities, and the rating agencies started dishing out triple-As. 10,000s of mortgage-backed tranches were rated triple-A.
At the start, these securities did well. A few asset-backed securities used ‘subprime’ mortgages (borrowers with a poor credit history, paying unfavorably high interest rates). But housing prices were booming, with defaults kept to a minimum. Rating agencies kept dishing out triple-As on subprime securities even as the underwriting deteriorated – with the housing boom turning into a bubble. When it burst, the rating agencies, and the investors who used them, were caught.
Rating agencies continued to grant triple-As due to a lack of regulation, a lust for big fees and market share, and sucking up to Wall Street traders.
When mortgage-backed securities arrived on the scene, ratings were ingrained in the very DNA of the capital markets. Lenders put ratings triggers in bond agreements – stipulations that a ratings downgrade could cause a debt payment to accelerate or collateral to come due. Soon ratings were needed for almost everything.
The SEC overlooked two problems. The first is that the bond market was essentially outsourcing its risk management to the rating agencies. The universal acceptance of their ratings resulted in almost no independent research by the fund managers who actually bought the bonds. They simply assumed that if the rating agency had given a bond a double-A or a triple-A, it must be safe. Second, the rules imbued the rating agencies with an “almost Biblical authority.” But that authority wasn’t remotely deserved.
The agencies provided charts and studies to justify their ratings, but anyone who dug deeply found they got it wrong, usually when something unexpected happened.
One study showed, 78% of the municipal bonds rated double-A or triple-A in 1929 defaulted during their Great Depression. These rating agencies missed the near default of US New York City, the bankruptcy of Orange County, and the ‘Asian’ and Russian meltdowns. They failed to catch US Penn Central in 1970 (then the largest bankruptcy in US history) and Nobel-Prize-linked Long-Term Capital Management in 1998. They often downgraded companies just days before bankruptcy – too late to help investors.
Yet even as the agencies made mistake after mistake, their power continued to grow, and they grew arrogant. The reasons were the rise of ‘structured finance’, and their ‘structured products’ business. Many executives got stock options for generating revenues and profits. Top executives started hiring those who could do uncomfortable things with ease, to advance their agenda of using structured finance to boost revenues, market share, and the agencies’ stock prices. This meant caring about whether the issuers – meaning the small group of investment banks who mattered – were happy with the ratings they got.
The structured finance side won over the corporate bond side of the agencies. Earlier, bond analysts resisted pressure to issue favorable ratings, but now the top executives warned analysts of the agency’s market share in various structured products, making sure they rated them well.
“We’re in business and we have to pay attention to market share. If you ignore market share, I’ll fire you,” said one head of Moody’s. And many were fired. Market share meant the rating agencies’ share of the securities market
“The rating agencies effectively gave birth to the subprime piggyback mortgage.” Those were subprime mortgages in which the homeowner avoided putting up any cash and got 2 loans – one for the mortgage itself and another for the down payment.
The great advantage issuers had in seeking triple-A ratings is that they rarely needed all 3 agencies to be involved in any one deal. Investors liked having 2 agencies rate a deal, but nobody cared about having all 3 involved. So issuers could play the agencies off each other. They didn’t really care which rating agencies bestowed the rating. All that mattered was the rating itself. “The triple-A was the brand, not Moody’s,” says a former Moody’s structured finance managing director.
Like everyone else utilizing risk models, the rating agencies used the mathematics of probability theory to arrive at their ratings… One obvious flaw of this approach is that nowhere in the process was anyone required to conduct real-world due diligence about the underlying mortgages. There is no requirement that a rating agency verify the information contained in RMBS loan portfolios presented to it for rating.” (RMBS: residential mortgage-backed security) A second problem is that the rating agency models were built on a series of assumptions. One assumption was that if housing prices declined, the declines would not be severe. Another was that the housing market in California was indeed uncorrelated with the housing market in Connecticut. Then there was the fact that assumptions could be changed. If the bankers didn’t like the outcome of the analysis, “a little rejiggering” was done.
If one agency revised its ratings downwards, bond issuers would go to another: Internally, the rating agencies had a term for this: ratings shopping. Ratings shopping was a classic example of why [Federal Reserve Chair] Alan Greenspan’s theory of ‘market discipline’ didn’t work in the real world. The market competition between rating agencies actually made them worse. Agencies grew more lax.
Rather than being based first on ratings quality, then price and service, they actually penalized quality “by awarding ratings mandates based on the lowest credit enhancement needed for the highest rating.”
LTCM exposed the dangers of derivatives in 1998. In 2001, when Enron filed for bankruptcy, though it had been faking profits for years, the rating agencies didn’t downgrade the company’s debt until 4 days before its collapse. Investors in both Enron’s stock and its bonds lost millions. The Enron bankruptcy was quickly followed by WorldCom, Tyco, and others. The rating agencies had failed to sniff out any of them, Government investigators later claimed.
To appease Washington – and fend off regulation – Moody’s adopted a code of conduct. Yet nothing changed. Not a single analyst lost his job for missing the Enron fraud. Management stayed the same. Moody’s stock price began rising again. “Enron taught them how small the consequences of a bad reputation were.” Nobody really wanted to reform the rating agencies. Investment bankers needed to be able to continue gulling, cajoling and browbeating the agencies into handing out triple-A ratings. Investors wanted to be able to rely on ratings instead of having to do their own research. Regulators found that in devising rules about risk taking, using ratings was the easiest path. “Most of the big investors – they like ratings to be scapegoats…They say, ‘Oh, we do our own analysis,’ but then when things go bad – well, it’s the fault of the credit rating agencies.”
No securities, which depended on triple-A rating, did more damage than wildly popular ‘collateralized debt obligations (CDOs). A CDO lumps just about anything that generates yield – bank loans, junk bonds, emerging market debt… The higher the yield, the better. CDO managers didn’t always have to disclose what the securities contained because those contents could change. Even more astonishing, investors didn’t seem to care. The way they viewed it, they weren’t so much buying a security. They were buying a triple-A rating. That’s why the triple-A was so key.
CDOs were fraught with risks and conflicts. Debt was being used to buy debt. CDO managers, paid a % of the money in the CDO, had an incentive to find stuff to buy. Wall St firms worked hand-in-glove with managers, earning hefty fees. Almost half of the cash flow generated by the assets in a CDO went to pay the bankers, CDO manager, rating agencies, and others who took out fees. CDOs also allowed banks and Wall St securities firms to move their worst assets off their balance sheets and into a CDO instead.
In 2002-3 the rating agencies were forced to downgrade 100s of CDOs. And when “loan diversification” proved flawed, they moved to real estate. Instead of “merely” using debt to buy the debt of a company, CDOs began using debt to buy the debt from a pool of mortgages, which was itself homeowner debt. Also, bonds backed by mortgages generally had higher yields than similarly rated corporate bonds. The ‘market’ understood quite well that mortgage-backed securities were riskier than corporate bonds and were compensating by insisting on a higher yield.
Firms searched for mortgage-backed bonds with the very highest yields and reassembled them into new CDOs. The original bonds didn’t even have to be triple-A! They could be lower-rated securities that once reassembled into a new CDO would wind up with as much as 70% of the tranches rated triple-A. Ratings arbitrage, Wall St called this, practice. A more accurate term would have been ‘ratings laundering’.
Soon, CDO managers were buying the lowest investment-grade tranches of mortgage-backed securities they could find and then putting them in new CDOs. Once this started to happen, CDOs became a self-perpetuating machine, like cells that won’t stop dividing…
The rating agencies were at the very heart of the madness. The entire edifice would have collapsed without their participation… The analysts in structured finance were working 12-15 hours a day… Moody’s top brass, he says, thought the mania would end with home prices flattening out, and as a result they wouldn’t add staff because they didn’t want to be stuck with the cost of employees if the revenues slowed down. “They were so stingy,” he says. At both Moody’s and S&P, former employees say there was a move away from hiring people with backgrounds in credit and toward hiring recent business school graduates or foreigners with green cards to keep costs down.
And of course nobody had the time or the inclination to examine the actual mortgages upon which this entire edifice had been built. If they had done so – if they had taken a hard look at the subprime mortgages that were at the heart of the securities they were rating triple-A – it would have meant putting an end to an immensely profitable business. “It seems to me that we had blinders on and never questioned the information we were given,” a former Moody’s executive later wrote. “It is our job to think of the worst-case scenarios and model them. Why didn’t we envision that credit would tighten after being loose and housing prices would fall after rising? After all, most economic events are cyclical and bubbles inevitably burst.”
…By the fall of 2005, Moody’s was one of the most profitable companies in existence. Between the time it was spun off into a public company and February 2007, its stock had risen 340%. Structured finance was approaching 50% of Moody’s revenue – up from 28% in 1998. It accounted for pretty much all of Moody’s growth…’
C. News Index______________________________________________
• ee News Index provides headlines and links to gain a sense of the weekly focus of published English ‘business news’ mainly to expose the backwardness of a multinationally controlled ‘local media’:
(ee is pro-politics, pro-politician, pro-nation-state, anti-corporatist, anti-expert, anti-NGO)
ee Sovereignty news emphasizes sovereignty as economic sovereignty – a strong nation is built on modern industrialization fueled by a producer culture.
• EU mixes up trade and human rights
‘The EU’s latest statement on Sri Lanka’s domestic policies is a declaration of hybrid war’
• Dinesh defends Govt. import restrictions to EU Ambassadors
• EU raises concerns over SL’s import controls, trade not one way street
‘negatively impact Sri Lankan exports by constraining the import of raw material and machinery’
• EU says SL’s withdrawal of support for UNHRC resolution remains a concern
• Chinese tyre giant takes the road less travelled
“This significant investment will boost the rubber-based manufacturing industry of the country, while creating new path ways to the export markets,”
• President looks to China’s model of development for Sri Lanka
• Prez says No Secret
‘It is no secret that the majority who voted for me then were Sinhala. They rallied because they had legitimate fears that the Sinhala race, our religion, national resources and heritage would be threatened with destruction in the face of various local and foreign forces and ideologies that support separatism, extremism and terrorism.’
• We are Committed to Peace and Non-Aligned: Open Letter to Prez-Elect Joe Biden
‘SL Study Circle: as reflected in our Constitution, ours is a Socialist State where public interest prevails over private interest; that is how 83% of the country’s Land -one of the key factors of production – is held by the Government, on behalf of the people, for the common good and use of the people.’
• US-China rivalry and the problem of ‘neutrality’ in foreign policy
• No More India First! A Rational & Better Foreign Policy – Balance
• To Escape the Geopolitical Knot
• Lanka’s non-aligned stance is a bulwark against foreign interference
• National integration and 13th A
‘How could anybody believe that the full implementation of the 13th A would not provide greater opportunity for such secessionist activity with greater collusion between internal and external separatist elements.’
• Jaffna HC dismisses petitions over LTTE commemoration in North
• Wiggy calls for change of heart among leaders, questions continuing high defence spending
• Wimal accuses UN of playing politics
• Fmr Irish President compares Trump refusal to concede with ’volatile and undemocratic situations’ in SL
• What is Mary Robinson Drinking? Ye Olde Empire Ale?
‘Robinson’s outburst offers us an excellent opportunity to delve into several archives: How the Irish became White, and more specifically the role of the Irish in the so-called ‘British’ Empire.’
• Imperialism’s Hired Coolie of the Pen: Merv’s Kolla
‘’ He has decided to swim to a Quad warship doing war games in the Malabar sea, perhaps to help drown whales on Panadura beach! He has joined the old US Anti-China Lobby. ‘
• East Container Terminal, Colombo port
• India-Sri Lanka Commercial Diplomacy
• ECT to India gets Cabinet approval
‘the country will incur a loss in earnings of US$ 12 million monthly should the government handover ECT operations to India.’
• US Advocata welcomes SL decision to resume stalled project to develop East Terminal
• Sri Lanka – China Friendship Association requests new Chinese ambassador to adhere to Zhou Enlai’s Eight Principles for Economic Aid and Technical Assistance in Sri Lanka
• “We need investments: not loans” President tells Chinese Ambassador
• Furor over Diplomats & the Story of Maxwell Gluck, American Ambassador to Ceylon
‘Alongside highly respected and seasoned diplomats, there are obvious “political appointees,” leading to inevitable furor and public criticism.If it’s any consolation, that’s about how the United States has picked its diplomats’
• Patronizing Terrorism in Kashmir
‘Destabilizing Pakistan is an old dream of the world’s self-claimed ‘biggest democracy’.’
• Canada’s Silence on India’s Colonization of Kashmir
‘Kashmir is one of the world’s longest outstanding international conflicts. The world’s most militarized zone is under a serious threat of demographic change that is aimed at altering the final resolution of the disputed territory. With the introduction of the new Domicile Law by the government of India on March 31, 2020, the project of intentional demographic change, in clear violation of international law, is underway. There is urgency for the international community to intervene as the Indian Government claims it has already issued close to two million Domicile certificates to non-Kashmiris, a step that has grave implications for the final resolution of the issue of Kashmir.’
• Understanding the Current International Order – Rand Military Report
‘Since 1945, the US has pursued its global interests by building and maintaining various alliances, economic institutions, security organizations, political and liberal norms, and other tools – often collectively referred to as the international order…US policymakers have consistently viewed the international order as a key means of achieving U.S. interests in the world’.
• Black Agenda Report Presents: The Left Lens Episode 8: Biden Wins – What Now?
C2. Security (the state beyond ‘a pair of handcuffs’, monopolies of legitimate violence)
ee Security section focuses on the state (a pair of handcuffs, which sposedly has the monopoly of legitimate violence), and how the ‘national security’ doctrine is undermined by private interests, with no interest in divulging or fighting the real enemy, whose chief aim is to prevent an industrial renaissance as the basis of a truly independent nation.
• US Navy Secretary talks of placing new fleet near Indian, Pacific Oceans
‘And we’re going to put it, if not Singapore right out of the chocks, we’re going to look to make it more expeditionary-oriented and move it across the Pacific’
• Pathfinder Foundation successfully concludes Indian Ocean Security Conference
• COVID colonialism: Vaccines are coming, but first to the rich
‘A bigger stumbling block is the World Trade Organisation’s TRIPS — Trade-Related Aspects of Intellectual Property Rights. The capitalist nations aggressively adhere to this provision to guard the patent of their inventions and discoveries, including lifesaving medicines and vaccines in a clear case of putting patent and profits before people’
• No budget allocation to facilitate Covid vaccine: Sarath F
• Inadequate support from govt. officers in Covid-19 related matters, PHIs claim
• LTTE’s abortive attempt to assassinate Gotabaya Rajapaksa
‘The 25 kilo bomb had been transported by the LTTE in a vehicle belonging to the reputed US international humanitarian organisation CARE (Cooperative for Assistance and Relief Everywhere)’
• Sri Lanka Education Minister to look into functioning of Madrasa schools
• Rishad explains visit of Easter Sunday attacks suspect’s house
• TNA opposes burial of coronavirus victims
• Sri Lankan ship sinks near Al Athaiba in Oman – report
‘The ship was loaded with miscellaneous goods and oil derivatives and carried 6 crews on board’
• Sri Lanka Navy to buy emergency response vessel from Colombo Dockyard
• 6th Contingent Serving at UN Peace-Keeping Mission in South Sudan, return
• President expands the Supreme Court by half
• Sri Lanka to give amnesty to those who broke tax laws or forex controls
• Sri Lanka to punish auditors and tax consultants, tax court planned
• MOD extends renewal of firearm licenses by two-months
• Bond scam case stalled due to Mahendran’s absence: Justice Minister
• Lalith Weeratunga Sil Redi Acquittal – What about Zuhair siphoning money from TRCSL to produce “Thanapathi Gedara” film distorting History?
• Excise Department arrests over 32,000 people in raids this year
• Garment factory cluster is over, government claims
• Let’s stop the blame game,:
‘Where some people try to find fault with the government, health ministry, doctors, nurses and the armed forces.’
• Elimination only strategy
• Govt to setup weapons museum
• Genetic testing – almost non-existent in government hospitals
• Pfizer has made it unequivocally clear that it’s no charity outfit
• India could get access to AstraZeneca vaccine by January: Serum
An Indian Government-backed vaccine, developed by private company Bharat Biotech, could be launched as early as February, a Government scientist told Reuters earlier this month.
• US fixer faces jail term upto 13 years; charges include pocketing US$5.6mn from Lanka
• Australian SAS Officers Brutalized, Killed Afghan Civilians
• Al-Qaeda’s Number 2 Killed In 2005, 2006, 2007, 2008 … 2017, 2020
‘As No.2 one might be media-killed anytime the U.S. seeks a pretext to ramp up sanctions on Iran.’
• Philippines eyes long-term defence pact with US
• Talk to China quickly to avoid a military conflict – Kissinger tells Biden…
• Joe Biden likely to break barriers, pick woman to lead Pentagon
‘She serves on the board of Booz Allen Hamilton, a defense contractor…Flournoy is a co-founder of Westexec Advisors… Flournoy helped create a think tank, the Center for a New American Security.’
• Back to liberal American hegemony
‘Biden will undoubtedly wield America’s mighty sword more judiciously, and with a friendlier face’
• Trump’s “America First” foreign policy faces an unceremonious burial
‘Dr. Simon Adams, Executive Director of the Global Centre for the Responsibility to Protect (R2P),
a former member of the international anti-apartheid movement and of the African National Congress in South Africa.’
• Nicholson Baker on his new book, freedom of information and America’s psychotic episode
‘He discovered long-hidden plans to bring starvation and pestilence to Korea, China, Nicaragua, the USSR and other countries; to infect foreign herds and crops and even people via air-dropped spiders and voles, and flies and feathers tainted with cholera, anthrax, smallpox, plague and typhus, to name but a few scourges involved. Canada wasn’t ignored: in 1950, Dale Jenkins, the chief of entomology at the CIA’s bio-warfare testing lab at Fort Detrick in Maryland, whose larger plan was to introduce yellow fever to Asia via insects, released three million radioactive mosquitos from an American Air Force base near Churchill, Man. They recovered 141 of them. (“The other 2,999,859 wandered off,” Baker writes.)’
C3. Economists (Study the Economists before you study the Economics)
ee Economists shows how paid capitalist/academic ‘professionals’ confuse (misdefinitions, etc) and divert (with false indices, etc) from the steps needed to achieve an industrial country.
• Does Sri Lanka have an alternative to neoliberalism?
‘Rhetorical rejections of neoliberalism are most certainly welcome. But, in the long term, what Sri Lanka needs is a plan.’
• State sector enriches oligarchs, or thrives in greatness?
• Ex-President Sirisena blames open economic policies introduced in late 1970s for present ills
‘“Local industries that had received a boost under the then Prime Minister Sirimavo Bandaranaike and Finance Minister Dr N. M. Perera collapsed after the introduction of open economic policies that depended on goods from overseas. The opening-up of the economy led to the country being flooded with imports, overwhelming local industries, local agriculture…’
• Budgetary deficit warranted during downturn – Prof Lakshman
• Pre-Budget Report: SL needs massive response to the economic crisis
‘It is becoming clear that JR’s open economy policy worked primarily for the richest Sri Lankans’
• Sri Lanka FM highlights importance of adequate funding for developing countries to overcome challenges to achieving SDGs
• Budget 2021: Gota’s Third War, But Forgive Me, It Is Our War Too
• Economic and financial backdrop of Budget 2021 – Sanderatne
• Many of our leaders don’t believe in “development” – Reductio Ad Abeyratnum
• Can revival of SOEs create the opportunity to alleviate the crushing debt burden? – Pathfinder
• World Bank ‘ready’ to provide funds for COVID-19 vaccine
• World’s biggest trade agreement won’t allow corporations to sue governments
• RCEP also Ties into the Belt and Road
• SOE Megamergers Signal New Direction in China’s Economic Policy
• Socialist or Capitalist: What is China’s Model, Exactly?
• Kenya too falls into Chinese debt trap – Venkat Narayan
• Economists Have Been Lying to Us for Decades
‘When I first heard the term “neoliberalism” it conjured up in my head a new age of bright-eyed, knowledgeable hippies with progressive agendas. I was wrong.’
• EU chief sees ‘progress’ on Brexit talks but work needed
‘Without an agreement, tariffs would be levied on the huge volumes of trade passing between the UK and the European continent, through the Channel tunnel and by ship, starting on January 1’
C4. Economy (Usually reported in monetary terms)
ee Economy section shows how the economy is usually measured by false indices like GDP, etc, and in monetary terms, confusing money and capital, while calling for privatization and deregulation, etc.
• Sri Lanka to merge small state banks into National Development Banking Corporation
• Central Bank says inflation is on target despite food price pressures
• $1b Port City investment forthcoming – Cabraal
• SL facing grave risk of defaulting on its debt obligations – Dr. Harsha de Silva
• Budget Speech 2021
• Future foreign financing to be sourced in line with development priorities: PM
• Foreign multinationals that dominate local market offered dividend tax carrot to boost exports
• Sri Lanka offers foreign exchange carrots amid monetary instability
• Budget 2021: Vehicle import controls to continue; boost for tourism, exports
• Budget 2021: Growth-oriented or more-of-the-same
‘The Central Bank of Sri Lanka, the IMF, the ADB and the World Bank are projecting that the economy will shrink for the first time in two decades…Wages and pensions of about Rs 1,000 billion and interest payments of Rs 900 billion are the two largest components in the 2020 provisional estimate of expenditure while projected revenue is about Rs 1,500 million’
• Budget 2021 to generate Rs.2.3 trillion revenue
• Five-year income tax exemptions for agriculture, livestock, and fisheries sectors
• Tax bonanza for companies filing for listings before December 2021
• Budget with proposals to boost revenue expected
• Cabraal: most investments to be rural-centric and mostly domestically financed
• Mega single GST for multiple products will be revenue neutral or positive: Attygalle
• Budget 2021 presents same old, failed neoliberal policies in new words: Harini
‘only serve to benefit an elite business community that emerged out of capitalism facilitated by neoliberal economic policy and not the small and medium entrepreneurs of this country.’
• Budget totally aimed at borrowing: Vijitha
“The Government intends borrowing Rs 3,000 billion (Rs. 3 trillion) in 2021. It had borrowed Rs 2,000 billion (Rs. 2 trillion) in 2020. Sri Lanka’s total debt services are Rs 13.2 trillion. With the borrowings of 2020 and 2021, it will be Rs 17. 2 Trillion. The burden is on the people. This is what the budget 2021 is all about, he said.’
• A shift towards a protectionist and failed import substitution industrialisation model
• Harsha says Budget lacks stimulus package to affected biz
• Rs. 700 b eyewash to show lower budget deficit: Harsha
• UNP wants Govt. to be transparent with public finances
• Statistical lies would not help the government hide the mega financial crisis – Champika
• Budget numbers “nonsensical”: Eran
• Privates want clarification on GST, 0.25% levy for insurance fund, retirement age flexibility
• National Movement for Consumer Rights Protection urges govt to plug revenue drains through Budget
• Sri Lanka Institute of Directors & BDO to host post-budget discussion
• Chamber wants reforms
‘On Local and Foreign Investment, Debt Management, Export Promotion, State-Owned Enterprises (SOEs), Capital Market and productivity enhancements in the public sector’
• 2021 Budget more significant given COVID-19 challenge: Standard Chartered Bank SL CEO
‘“With the Government flagging the national need to change the Sri Lankan mindset to a production-based economy that supports exports and domestic production capabilities with less imports, the onus is on the banks to assist the Government to kick-start the economy, for businesses to thrive and the nation to progress,”
• Best of the best at Daily FT-Colombo Uni. MBA Alumni 2021 Budget Forum today
‘Strategic Partner is Standard Chartered Bank, Technical Partner is PwC, Capital Markets Partner is SC Securities Ltd., Creative Partner is Phoenix Ogilvy and Electronic Media Partner is Ada Derana 24.
• US Advocata dialogue on ‘21 Budget is out! What Now?’
• A budget oozing overoptimism
‘Budget 2021 does not reveal how the Treasury is going to meet USD 6 billion worth of foreign currency debt obligations falling due during 2021 while having only USD 5.5 billion official reserves with the Central Bank. If the government fails to raise at least USD 6 billion external borrowings, it will be forced to default on its external debt obligations…’
• Suppliers boycott Sathosa; Trade Ministry seeks Rs. 2bn from Treasury
• CB wants banks’ credit loss provisioning to reflect more credible economic forecasts
• CB raises $62 m more via fresh SLDBs
‘Central Bank (CB) said yesterday it raised $ 62 million afresh via Sri Lanka Development Bonds (SLDBs) on top of $ 24.8 million last week.’
• $75 SLDB issue goes undersubscribed by over 60%
• Weekly auction goes undersubscribed for a fourth consecutive week
• Govt. hints at returning to eurobond market
• Low deposit interest rates drive retailers
‘The Colombo Stock Exchange (CSE) is seeing a flock of retail and High Networth Individuals (HNWI) – essentially due to low deposit interest rates, analysts said.’
• Lanka to continue to enjoy GSP post-Brexit
• Indian Economy Seeing ‘Strong Recovery’, says Finance Minister
• The Huge New Trade Deal ‘Western’ Media Do Not Like To Talk About
‘ Fifteen Asia-Pacific nations including China and Japan plan to sign the world’s biggest free trade deal this weekend. The FTA will cut tariffs, strengthen supply chains with common rules of origin, and codify new e-commerce rules.’
• India’s farewell to ASEAN as it boards RCEP train
• Regional Responses to U.S.-China Competition in the Indo-Pacific – RAND Report
‘Although Washington is slightly ahead in the diplomatic and political sphere, and it clearly leads in the security and military domain, Beijing is dominant economically. Overall, China is an unavoidable partner for Vietnam, as it maintains the preponderance of influence in the country. Consequently, Vietnam’s top priority will be to maintain positive ties with China.’
C5. Workers (Inadequate Stats, Wasteful Transport, Unmodern Plantations, Services)
ee Workers attempts to correct the massive gaps and disinformation about workers, urban and rural and their representatives (trade unions, etc), and to highlight the need for organized worker power
• Govt. opening Pandora’s Box with plantation wage: Sunshine’s Govindaswamy
‘Warns other trade unions may be tempted to get salary hikes included in Budget
• Govt. to introduce arbitration to resolve trade union disputes
• Private-sector style Labour Laws for State Sector – Cabinet spokesman
• Sri Lanka to charge 0.25-pct social security levy from businesses
• Sri Lanka Ports Authority declared as an ‘essential service’
• Companies paying pro-rate wages to require permission from Labour Ministry
‘The Labour Ministry yesterday said companies paying pro-rate wages had to notify the Ministry of why they were facing cash flow issues and get permission to initiate paying partial salaries to employees not reporting to work.’
• FTZ manufacturers request Govt. to study situation before raising retirement age to 60
• FTZ manufacturers oppose 60 year retirement age
• Most SL children live in families struggling financially: UNICEF report
‘36 per cent of children live in families with a per person expenditure of less than Rs. 278 a day…For over 70 per cent of Sri Lankan households, food comprises more than 40 per cent of their total expenditure, limiting the capacity to invest in their children; ‘
• Company closures and lost jobs: no Budget explanation yet – UNP Deputy Leader
• Colombo Port limps towards normalcy
• Customs takes new steps to speed up cargo clearance
• Voluntary Retirement Scheme of Sri Lankan Airlines Ltd., approved
• SL’s outward labour migration down by over 57% in first half
• Worker remittances record 6th consecutive monthly increase in Oct.
• 47,000 workers waiting to return, 20,000 lost jobs, 67 migrant workers have died.
• Labour Minister explains difficulties in bringing back Lankan migrant workers
• Govt to pay compensation to families of deceased migrant workers
• Sri Lanka Embassy in Moscow advises Sri Lankans not to fall victim to human trafficking
• Ceylon Chamber critical of Budget 2021’s plantation wage
“With respect to wage reform, the chamber recommends that reliance continues to be placed on the time-tested mechanism of collective bargaining, which has so far been adopted consistently across industry sectors and encompasses factors related to productivity and worker welfare and as such that the government reconsiders the budget-based wage intervention for the plantation sector. The incorporation of productivity linkages within the proposal to increase wages of plantation sector workers is also a subject, which merits further consultation.”
• Planters’ Association urges wage reform for every plantation worker
• Tea industry urges productivity-based wage model before it sinks
• MP Samarasinghe says non-resident city universities the answer to solving tertiary needs
‘Around 375,000 children entered school education annually. “As per 2018-2019 figures around 267,000 sit the GCE Advanced Level examination. Of them 150,000 get through the examination and are qualified for university education. But our universities enroll only around 32,000 students a year. It is around 8.53 per cent of the original figure. Today in the country’s job market around 80% jobs are provided by the private sector. The public sector provides only 20% of jobs. So education should cater to the needs of the job market.’’
• Baduraliya children to get 4G in a fortnight after social media posts: TRC
• Legatum Prosperity Index highlights development of education and healthcare in SL
• Police crackdown on hawkers at traffic lights
• IFC and Australian Government help create and retain jobs for 12,000 women in Sri Lanka
‘A two-year partnership, known as SheWorks Sri Lanka, has led to a 12% increase in the number of women employed by 15 of the country’s leading companies, equating to over 12,000 more women in the workforce. Initiated by Women in Work, a partnership between IFC – a member of the World Bank Group – and the Australian government… SheWorks Sri Lanka members include AIA Insurance Lanka Ltd, Brandix Lanka Ltd, CBL Group, DIMO PLC, Fairway Holdings (Pvt) Limited, Hela Clothing, Hemas Holdings PLC, Jetwing, John Keells Holdings PLC, London Stock Exchange Group, MAS Holdings, National Development Bank PLC, SANASA Development Bank, South Asia Gateway Terminals, and Standard Chartered Bank.
• Lankans in Australia
‘Sri Lankan mass migration commenced in the 1870s when the administrators in Queensland worked on the possibility of bringing manual labour from Sri Lanka for the sugar cane industry, ironically, at a time tea plantations here imported labour from South India… In 1870 the first ‘shipment’ of Lankans to arrive in Queensland. They had to work in sugarcane plantations and were notably known commonly as Cingalese, irrespective of racial or ethnic differences.’
• Rebirth of Canadian Auto? Unifor and the Detroit Three
‘Corporations have ‘weaponized’ their control over investment. Decisions on investment and collective bargaining were once relatively distinct. Today, however, the auto majors routinely delay key investment announcements until bargaining. This serves a double purpose: a sword hanging over workers’ heads to restrain their demands or force concessions and, after a tentative settlement has been arrived at, job announcements that aid the union leadership and bargaining committees in selling the agreement as an ‘unprecedented’ victory.’
C6. Agriculture (Robbery of rural home market; Machines, if used, mainly imported)
ee Agriculture emphasizes the failure to industrialize on an agriculture that keeps the cultivator impoverished under moneylender and merchant, and the need to protect the rural home market. Also, importation of agricultural machinery, lack of rural monetization and commercialization, etc.
• Courts – Lawyers & Land Owners omitted in setting up e-Land-Register
• SL desperately needs a strategic, transparent and comprehensive State land management policy
• Cabinet approves to expedite Gin-Nilwala river diversion project
‘The Gin and Nilwala rivers carry 2000 and 1200 cubic meters of water into the ocean’
• Budget 2021: rural economy unaddressed
‘Rural economy, agriculture and food security haven’t been addressed adequately. The rural economy currently contributes 7% of GDP and has suffered years of neglect. In terms of food security, although Sri Lanka is almost self sufficient in rice to possibly keep the population from starvation other food imports from wheat to nutritious food items like seafood (USD 215 million), milk (USD 312 million), pulses (USD 138 million) are largely imported.’
• President’s promises to the people of Himbiliyakada in Matale are being fulfilled
• Sri Lanka to open Rs6.9bn Peliyagoda Manning vegetable market
• Accent on agriculture, irrigation, water supply, plantation, trade, fisheries and land
• Climate change: Looming threats to irrigated agriculture in SL
‘All the irrigation systems are not reservoir-based. There are large number of anicut-based minor irrigation systems. They depend on water diverted from rivers or streams. The success of these systems depends on the water availability of rivers and streams.’
• Heated exchange between EP Governor and TNA MPs
‘those lands were grasslands for the cattle of the Tamils for centuries.’
• Fmr Chairman of Ceylon Fertilizer Company arrested over financial fraud
• Need for planting proper rubber clones
• MoU between Tea Research Institute of Sri Lanka and CSIR-Institute of Himalayan Bioresource Technology, India
• Five-year income tax exemptions in Budget for agriculture, livestock, and fisheries sectors
• The calamitous impact of the coronavirus on fishing livelihoods
‘Sri Lanka’s fish exports were hit by a merciless blow, when all international trade links were shattered in April 2020. Tons of fish caught by multiday crafts remained unsold and, offshore and deep sea fisheries and, even the export oriented ornamental fisheries industry, were literally padlocked. All crew workers of these boats became jobless and were confronted with intense livelihood crises.’
• Former Sri Lanka Fisheries Minister eats raw fish
• Concessions on dairy: Investment value $ 10 or 25 m?
• Do you bury your dead computer?
‘The problem of e-waste looms large for Sri Lanka as unsafe disposal poses grave risks to the environment and human health’
• Sinharaja expansion gazette published
• President launches ‘Husma Dena Thuru’ afforestation project
• ‘Govt. destroying 500,000 hectares of forests’ – Harsha De Silva
• New directive sidelining Forest Dept. will place 690,000ha of forest in jeopardy’
• SJB asks why govt. that promised to increase forest cover taken away 700,000 acres
• MP Pathirana reveals ruse resorted to by unscrupulous businessmen to grab forest lands
• UK appoints champion to support SL to deal with climate change
• The biggest creature ever to live abounds on Sri Lanka’s porches
‘The elusive blue whale, twice the weight of the hugest known dinosaur, seems to like Serendib just as much as you and I do. The boon for science is comparably enormous, not to mention tourism.’
C7. Industry (False definitions, anti-industrial sermons, rentier/entrepreneur, etc)
ee Industry section notes the ignorance about industrialization, the buying of foreign machinery, the need to make machines that make machines, build a producer culture. False definitions of industry, entrepreneur, etc, abound.
• Govt. gearing for US entry into power sector
‘US-based companies New Fortress and General Electric (GE) had forwarded a project proposal through US Ambassador Alina Tepliz, “proposing a Liquid Natural Gas (LNG) solutio’
• Lakvijaya breaks down again; only one unit working
‘The Ceylon Electricity Board is seeking to have a 300mw extension to Lakvijaya built by the same company that did the other three units–China Machinery Engineering Corporation. Earlier this year, the utility called for expressions of interest to hire a financial consultant for the project’
• Fitch affirms Ceylon Electricity Board at ‘AA+(lka)’; outlook negative
• 104MW Wind Power Project in Mannar to be commissioned on Tuesday
‘The project was conceived by CEB and was fully funded by the Asian Development Bank (ADB)’
• Lanka IOC nearing completion of Sri Lanka’s first grease plant
• Major shipping line MSC in temporary pull out from SL
• Two projects of the Hambantota Development Plan will commence tomorrow
• First-ever FDI to Hambantota Port zone signing today
‘Chinese investment initially to manufacture radial car and truck/bus tyres for export. ‘
• Laxapana Batteries to diversify into renewable energy with Rs. 1 b investment
‘EB Creasy holds a 51% stake in Laxapana Batteries Plc whilst it has 1,556 public shareholders holding a 34% stake…Laxapana Batteries Plc was set up in 1956 to manufacture dry cell batteries… one of the first industrial ventures set up to cater to the needs of rural hinterland of the country…the company lost its competitiveness due to open market policies and technological developments in the dry cell batteries and ceased manufacturing operations… synonymous with the first major hydropower scheme in the country (established a few years prior in 1950), enabled the company to continue trading in a variety of imported dry cell batteries and LED lighting.’
• PM inaugurates Rs. 131.5 billion Phase II of BIA expansion project
‘using Japanese advanced technology and expertise’
• SriLankan Airlines loses Rs36.3bn up to Aug 2020
• Contractor not working in spite of Rs 16 bn payment
‘Kadawatha-Mirigama stretch of the Central Expressway.’
• COPE takes up procurement process, feasibility study audit, etc., of Central Expressway Project from today
• Procurement Commission key to stop large-scale tender irregularities: Karu
• Govt. foregoes Rs.784Mn as tax revenue from Ethanol
• Chartered Accountants, Sanasa Development Bank sign MoU for SMEs better access to finance
• Standard Chartered funds state hospital, SMEs in Sri Lanka
• Sri Lanka bans export of scrap iron, copper, aluminium, stainless steel, zinc
• New era for local motor vehicle assembly with 2021 Budget: SLACMA
• SL Automotive Component Manufacturers’ Association says Budget 2021 ushers new era
• Shipments with parts to assemble over 300 DFSK SUVs before March next year
• Price reduction of motor spare parts unlikely
• Reconsider the ban on vehicle imports: VIASL urges Govt.
• Vehicle import tax revenue declined by 47.1% in first eight months of 2020
• ‘Heavy focus on continuing infrastructure drive’
• Melstacorp invests Rs. 175 m more in upcoming cement JV
‘The new venture, ‘Melsta Gama’, is with Pyramid Gama, a joint venture between Gama Corp. of Indonesia and Pyramid Holdings of Sri Lanka.’
• Tokyo Cement enhances production of Ordinary Portland Cement & Hydraulic Cement
‘at the existing location at Cod Bay, China Bay, Trincomalee’
• Four projects for Batti fabric processing zone
• Ocean Lanka enters into partnership with Cotton made in Africa (CmiA)
‘Cotton made in Africa is an initiative of the Aid by Trade Foundation’
• Real coconut arrack may soon become history warns Harry J
‘DCSL, previously a State near-monopoly, was privatized in 1991. The dominant shareholder of DCSL is Melstacorp PLC, a Harry J company (92.46%). Other companies connected to him in the Top 20 shareholders list are Milford Exports (3.21%), Lanka Milk Foods (0.98%), Stassen Exports (0.05%) and his son, Hasitha Jayawardena (0.05%). The directors of the company are: Harry Jayawardena (Chairman/MD), CR Jansz, R. Seevaratnam, Niranjan Deva Adittya, Capt. (Rtd.) KJ Kahanda, Dr. Naomal Balasuriya, Hasitha Jayawardena, Ms. VJ Senaratne and Amitha Gooneratne.’
• ‘Leveraging Technology to Drive Economic Revival’
• Impact of Budget 2021 on the Sri Lankan IT/BPM industry
• Remember “Flying Pigeon” and “Phoenix” bicycles imported from China
• Thailand leads in race for ASEAN Digital Hub with upgraded ICT infrastructure
‘Industry research estimates that a 20% increase of domestic investment in ICT sector will drive the country’s GDP increase by at least 1%. By 2030, Thailand’s digital economy is expected to contribute 30% of the country’s GDP, up from 10% at present.’
• Tractor Magric 80.2, a Cuban product for agriculture
’An 80 horsepower rear traction tractor designed to carry out plowing, cultivation, fertilization and transport, with 30% of components made in Cuba’
C8. Finance (Making money from money, banks, lack of investment in modernity)
ee Finance tracks the effects of financialization, the curious role of ratings agencies, false indices, etc.
• National Development Banking Corporation, merging multiple small state banks
• Pawning loans grow only by Rs.30bn in Jan-Sept. contrary to claims
• Bourse fails to bloom for 2021 Budget
• Shares rise on consumer staples boost
• Net foreign buying at CSE after months but closes negative…
• Taxation on banks could change with fresh instructions on provisions for expected credit losses
• State Minister Cabraal to speak on Budget at Association of Professional Bankers Forum
• Budget with PwC | Post-Budget Analysis 2021
• NSB resumes granting of CBSL recommended debt moratorium
• Ex-HSBC and DFCC’s Shamindra joins People’s Leasing as new CEO/GM
• Abans Finance profit surges 130% in 1st half of FY 2021
• Amãna Bank Profit Before Tax (PBT) of LKR 389 million in Q3
• HNB signs as settlement banking partner for LOLC Finance card transactions
• Coping with pandemic in South Asia by making it easier to trade : ADB
• Standard Chartered releases first sustainable finance impact report
C9. Business (Rentierism: money via imports, real-estate, tourism, insurance, fear, privatization)
ee Business aka ee Rentier focuses on diversions of the oligarchy, making money from unproductive land sales, tourism, insurance, advertising, etc. – the charade of press releases disguised as ‘news’
• Bring back your hidden money, PM tells businessmen
• Assured policies won’t change for 5 years; that itself is good enough for me – Sumal Perera
• Sunshine Profit after tax (PAT) Rs. 1.3 billion 2Q
• Hemas profits soar in September quarter
• Aitken Spence achieves Profit-Before-Tax (PBT) of Rs 1.13 Bn in 2Q
• Softlogic inflicted with tougher 2Q; Healthcare biz fairs well
• Janashakthi Life pre-tax profits Rs. 545.03 million
• Sri Lanka added to UK’s travel corridor list
• Facebook partners with the Information and Communication Technology Agency
• Legal framework of Colombo Port City to Parliament in January
• ‘80 Club’ land and building taken over by Govt; Divisional Secretary
• The allure of Havelock City
• A property market boom is coming – Capital Trust Properties
‘CTP is the registered agents for CBRE, Colliers and Knight Frank, reputed global property agents’
C10. Politics (Anti-parliament discourse, unelected constitution)
ee Politics points to the constant media diversions and the mercantile and financial forces behind the political actors, of policy taken over by private interests minus public oversight.
• Lankan President Gotabaya Rajapaksa outlines his domestic and foreign policies
‘The era of betraying war heroes, selling national assets, willingness to accept any deal for short-term gains, allowing foreign forces to interfere in the internal affairs of the country has now come to an end’
• MR’s b’day, GR’s anniversary, Lalith’s and Anusha’s tomorrow
‘He should realize that those who truly love him reside outside the ‘security circle’ of people who surround him. They are the ones who prevent the truth of the country from reaching his ears. It would do him a world of good if he was careful of these yes-sir, under-control-sir ‘friends’. They are just Mervin Silvas, only they have different names and friends. They’ve come forward not to make deals that favor the country but deals that favor their stomachs.’
• Gota’s no-frills first year, whines and whiners
‘NGO lords and ladies insisted their organisations be left out of RTI purview. For a reason. Obviously.’
• UN Resident Coordinator’s missive to PM and what an ordinary Sri Lankan thinks about it
‘She represents the UN Secretary-General in Sri Lanka.’
• ‘Democracy First’: Lessons For The Lankan Left From US Left – Jayatilleka
• The Gotabaya Rajapaksa Presidency: Year One – Jayatilleka
• My quarrel is with the people of Lanka foolish in the exercise of their ballot – David
• Govt. alone cannot solve all problems – USAID NPC Perera
• The Pohottuwa Government of Sri Lanka Part 2 C5A,B, C,D, C8H, I & J
• Has Trump Really Lost The Presidential Election?
‘To date none of the states have certified Biden’s purported victory… this writer has heard some CNN presenters even referring to a ‘Biden Administration’! What right has the media to do this?’
• The FBI’s War on the Left: A Short History of COINTELPRO
‘The Bureau’s COINTELPRO deployed every trick and crime in the book to crush left dissidents, from disruption to assassination.’
• Black Agenda Report Presents: The Left Lens Episode 8: Biden Wins – What Now?
• The white supremacy establishment comes in many shades
C11. Media (Mis/Coverage of economics, technology, science and art)
ee Media shows how corporate media monopoly determines what is news, art, culture, etc. The media is part of the public relations (corporate propaganda) industry. The failure to highlight our priorities, the need to read between the lines. To set new perspectives and priorities.
• Bakeer Markar alleges police are to arrest 200 critical journalists
• Takeover of SL television station by a company with diaspora connections
• Let the people meme
• Current Crisis of Performing Arts Education in Sri Lankan Universities
‘For the last ten-fifteen years, the World Bank and the Ministry of Higher Education have spent millions of rupees on effecting changes to undergraduate education in the country. Therefore, it is not the COVID-19 that led to the germination of the idea of online and blended learning in universities.’
• Wire Communication’s largest client base in Strategic Communications and Reputation
• The extraordinary Alagu Subramaniam
‘He was one of the founders and editors of the literary magazine Indian Writing. Rabindranath Tagore and Jawaharlal Nehru were two of its eminent contributors. Alagu was also secretary of the London branch of Indian Progressive Writers’ Association and was involved in the anti-colonial organisation Swaraj House.’
• Wipro’s Azim Premji most generous Indian, donates INR 220 million daily!