What Impede Economic Revival
in the North&East Province of Sri Lanka?
--Muttukrishna Sarvananthan
Introduction
The Government of Sri Lanka (GOSL) lifted the economic embargo on the
rebel held areas of the North&East (N&E) province on January 15, 2002.
The economic embargo was in effect since 1990 and covered over 60 consumer
goods including fuel, food, and medicine. Some goods were totally prohibited
from entering the rebel held areas of the N&E province and some had quantitative
restrictions. The economic embargo created an informal market for these prohibited
and restricted supplies of goods in the rebel held territory, which is almost
30% of the total land mass of Sri Lanka.
The economic embargo made the Liberation Tigers of Tamil Eelam (LTTE)
rebels to play a dominant role in the management of the economy in the territory
under their jurisdiction. This in effect created a dual economic system in
the country. Whilst the rest of Sri Lanka pursues a private sector led liberal
market economic model, the LTTE held territory has been pursuing a command
economic model in the past 12 years. Some of the salient features of such
a command economy were severe shortage of essential and other consumer goods,
rationing, hyperinflation, and LTTE run transport, trade and productive enterprises.
At long last, the economic embargo was unilaterally withdrawn by the
GOSL with effect from January 15, 2002. It is now one year since the lifting
of the economic embargo. The objective of this paper is two folds; one is
to highlight the implications of the lifting of the economic embargo on the
economy of the N&E province. The second is to identify the factors that
inhibited economic revival in the N&E province in the past year, since
the lifting of the economic embargo.
After the lifting of the economic embargo in January 2002 the economy
of the N&E province got further impetus with the opening of the A9 highway
on April 08, 2002. The A9 highway is the major road linking the Northern Province
with the rest of the country, which was closed from Vavuniya to Jaffna for
vehicular and civilian traffic for about 12 years. It is important to remember
that while the lifting of the economic embargo was done unilaterally by the
GOSL, the opening of the A9 for vehicular and civilian traffic was an outcome
of the Memorandum of Understanding (MoU) signed between the GOSL and the LTTE
in February 2002 as a result of the facilitation by the Norwegian government.
The withdrawal of the economic embargo and the opening of the A9 highway
have resulted in the reintegration of the N&E economy with the rest of
the country. There is free flow of goods (except arms & ammunition, explosives,
remote control devices, telescopes, and pen torch batteries) from the rest
of the country to the LTTE held areas and vice versa. However, though
the GOSL has withdrawn the requirement to obtain a pass for the movement of
civilians to and from the LTTE held areas, the LTTE still operates a pass
system, albeit a less stringent one to what was in operation before. Thus,
the movement of civilians to and from the LTTE held areas is still not totally
free. The two-way flow of goods (to/from the LTTE held areas) has its gainers
and losers.
The free flow of goods from the rest of the country (including imported
items) to the LTTE held areas has gainers and losers. Thus, the consumers
in the LTTE held areas are the major gainers and the producers in the LTTE
held areas are the major losers. On the positive side, the free flow of goods
from the rest of the country to the LTTE held areas has depressed the prices
of such goods which benefits the consumers. However, the prices of such goods
are still higher than what it ought to be due to the taxation by the LTTE.
On the negative side, the free flow of goods from the rest of the country
to the LTTE held areas has badly affected the local producers of the same
or similar goods. Many local producers in the LTTE held areas are deprived
of their livelihood due to the inflow of cheaper and better quality Sri Lankan
made and foreign made goods.
In the same line, the free flow of goods from the LTTE held areas to
the rest of the country has gainers and losers. The producers in the LTTE
held areas have benefited from the opening of the entire Sri Lankan market
to their produce because of higher prices they fetch now. On the other hand,
the consumers in the LTTE held areas have lost out because of higher prices
they have to pay now. During the time of economic embargo perishable agricultural
produce including vegetables, fruits, and fish were very cheap in the LTTE
held areas due to over supply. But, the prices of these perishable food items
have shot up since the opening of the A9 highway. As a result the consumers
in the LTTE held areas are worse off now than before.
In sum, the lifting of the economic embargo and the opening of the
A9 highway has costs and benefits to the economy and people of the N&E
province. The main challenges in the province are for the local producers
(who have lost out due to the influx of goods from other parts of the country)
to become competitive or find alternative productive activities, and the local
consumers to find means of increasing their income in order to afford to purchase
the higher priced local food produce.
Unfortunately, alternative productive activities and increasing the
income levels of the consumers are slow to come by due to a variety of factors.
Although trade between the N&E province and the rest of the country has
expanded enormously, not many new productive activities have taken place in
the past one year. This has, quite naturally, resulted in disenchantment among
the masses. It is important to remember that the present situation is a pause-in-conflict
rather than a post-conflict situation.
Historically, agriculture was the mainstay of the N&E economy,
specifically food crops, cash crops (such as chillies, onions and tobacco),
and fisheries. There seems to be fundamental institutional impediments to
kick start productive activities in all sectors of the N&E economy. The
major objective of this paper is to identify these institutional impediments
to economic revival in the N&E province. The process by which these institutional
impediments were identified was through study tours to 6 out of 8 districts
in the North&East province (including both the government held and LTTE
held territories) in the past 10 months by the author. These study tours entailed
meeting government officials (central, provincial and local), LTTE officials,
non-governmental officials (local, national, and international), learned people,
entrepreneurs, and the general public.
Impediments
(i) Sri Lankan side
One of the major institutional impediments is the high security zones
imposed by the Sri Lankan armed forces in the N&E province, particularly
in the Jaffna peninsula, in line with the MoU. The majority of the Northern
Province population lives in the Jaffna peninsula. Almost one-third of the
land area of the peninsula (in Valikamam north) is classified as high security
zone and barred for civilians, which used to house more than 100,000 people.
These people are now displaced and productive activities discontinued. This
vast high security zone encompasses some of the most fertile agricultural
lands in the peninsula. During the pre-war times the N&E province used
to produce a significant proportion of the total requirement of rice, chillies,
onions and tobacco of the entire country. Since the beginning of the civil
war in 1983 a major proportion of rice, chilli, and onion requirements are
imported from abroad.
Moreover, the Sri Lanka army occupies almost half the city centre of
Jaffna. It is important to remember that Jaffna is the commercial hub of the
N&E province. The occupation of prime commercial properties in the heart
of the city is one of the major obstacles to business development in the peninsula.
Several hotels and other private and public properties in the city are still
occupied by the Sri Lanka army. Ironically, while security barriers and checkpoints
in the city of Colombo have been removed since December 2001 the city of Jaffna
still resembles a theatre of war.
Further, certain time and geographical restrictions on fishing still
exist in the Northern Province, particularly in the Jaffna peninsula, despite
some relaxation in the past one year. Fishing is one of the primary economic
activities in the N&E province, and during the pre-war times used to account
for two-thirds of the total fish catches of the country. However, due to severe
restrictions on fishing, Sri Lanka has become a significant importer of fish
in the past two decades. The restrictions on fishing in Sri Lanka have resulted
in fisherpersons from India, Japan, Taiwan and Thailand encroach the Sri Lankan
seas.
The A9 highway is opened for vehicular and civilian traffic for only
10 hours a day (7.30am to 5.30pm) and six days a week. This highway is closed
on Sundays. These restrictions are another major impediment to economic revival
in the Northern Province. The entrepreneurs in the Jaffna peninsula complain
that it takes 3 days for goods to arrive from Colombo via the A9. This is
not only because of the restricted access to the highway, but also due to
checking at four points by the Sri Lankan army and the LTTE (two points each).
The entire consignment is offloaded, checked and reloaded into lorries and
trailers at each point. The Sri Lankan army checks the flow of goods via the
A9 in order to ascertain whether banned items are being transported, whereas
the LTTE checks are primarily for the purpose of taxation. These delays in
the transport of goods via the A9 increase the transaction cost of businesses.
The businesses in the N&E province are not entitled to engage in
import/export trade directly. That is, businesses in the N&E province
cannot open Letter of Credit (LC) at the banks in the province. Hence, the
traders in the province have to purchase imported goods from Colombo-based
importers, which increase the transaction cost and consequently the retail
prices. This is a major hindrance to external trade development in the province.
The banks in the N&E province are stringent in the disbursement
of loans to farmers, fisherpersons, and traders. The collateral requested
by banks in the province seems to be higher than what is required in other
parts of the country. Although many private banks have ventured into the N&E
province in the past one year, the primary motive seems to be tapping the
savings of the masses in the province. Thus, the lack of access to bank credit
is identified as one of the major impediments to economic resurgence in the
N&E province.
Another reason for the lack of bank finance for businesses in the Jaffna
peninsula is that since the peninsula was cut off from the rest of the country
for a long time a lot of new businesses established in the past 20 years are
unregistered with the GOSL. Most of these unregistered businesses may have
wilfully done so in order to avoid paying business taxes to the GOSL, because
they do pay tax to the LTTE. In the Northern Province it has been easier to
evade government taxes, but not the LTTE taxes. It is extremely difficult
to pay taxes to both the government and the LTTE and keep the business afloat.
Therefore, most of the new businesses opted to be unregistered and be in the
informal economy. This non-registration deprives them of access to bank loans.
(ii)
LTTE side
Another major impediment to economic revival in the North&East
province is the taxation by the LTTE. The LTTE imposes direct and indirect
taxes on the people of the province. The public servants in the province are
occasionally asked to contribute a certain percentage of their monthly salary
as income tax. For example, occasionally school principals are asked to set
aside a certain percentage of the monthly salaries of teachers to pay the
LTTE. Sri Lanka is a unique country where public servants do not have to pay
income tax (Indian public servants, for example, do), but the Sri Lankan public
servants working in the N&E province are illegitimately taxed by the LTTE.
The private tutors in the province are taxed as well.
These taxes are not only imposed in LTTE held areas but also in government
held areas of the N&E province. The tiger tax regime has been in operation
at least since 1990 and is not an outcome of the MoU signed in February 2002.
However, until the signing of the MoU these taxes were levied clandestinely
in the government held areas of the N&E, but now it is much more open
and systematic. This illegitimate imposition of income tax has resulted in
the exodus of teachers, medical officers, and other public servants from the
province that has depleted and deteriorated the public service in the province.
There is a severe shortage of school/university teachers and medical
officers in the N&E province, because very few Tamil speaking teachers
and medical officers (let alone the Sinhalese) are willing to take up posts
in the province. During the time of war the fear of probability of being killed
was the primary reason for the lack of interest in working in the province.
However, even after the ceasefire there is not much interest among public
servants to work in the N&E primarily because of the fear of the LTTE
taxation. It is important to note here that the Sinhala public servants working
in the N&E are not taxed, and only the Tamils and Muslims are taxed. Thus,
during the past one year LTTE taxes have been the major cause of the failure
to improve the quality of public education and health services in the province.
The farmers in the LTTE held territory are also taxed either in cash
or in kind. The farmers and fisherpersons are expected to contribute part
of their output to the LTTE coffer irrespective of their income level or the
size of the household. The taxation of the agriculture sector by the LTTE
in the N&E province is again a unique phenomenon because the farmers in
other parts of the country are exempt from income taxation. Likewise, small
scale manufacturing concerns and service providers are also taxed a percentage
of their monthly income. In some parts of the Jaffna peninsula the LTTE has
the audacity to demand taxes from businesses backdating from 1996 when the
LTTE was forced to withdraw from the peninsula. The direct taxes paid by the
farmers, small-scale manufacturers, and service providers are passed on to
the customers in the form of higher prices. Hence, the higher prices of goods
in the N&E province, even after the lifting of the economic embargo, are
mainly due to taxes imposed by the LTTE.
On the issue of tiger taxation it is worth referring to Che Guevara,
the icon of guerrillas worldwide;
“The fundamental principle that ought to prevail is that of paying
always for all merchandise taken from a friend. This merchandise can consist
of crops or of articles from commercial establishments. Many times they will
be donated, but at other times the economic conditions of the peasants prevent
such donations. There are cases in which the necessities of warfare force
the band to take needed food from stores without paying for it, simply because
there is no money. In such cases the merchant ought always to be given a bond,
a promissory note, something certifies to the debt” (Che Guevara, Guerrilla
Warfare, Manchester University Press, 1985, pp121). “Merchandise that
cannot be paid for in cash will be paid for with bonds; and these should be
redeemed at the first opportunity” (Che Guevara, op cited, pp 79).
“If conditions continue to improve, taxes can be established; these
should be as light as possible, above all for the small producer. It is important
to pay attention to every detail of relations between the peasant class and
the guerrilla army, which is an emanation of that class. Taxes may be collected
in money in some cases, or in the form of a part of the harvest, which will
serve to increase the food supplies” to the guerrillas (Che Guevara, op
cited, pp122).
In addition to direct taxes the LTTE imposes an array of indirect taxes.
The goods being transported to LTTE territory or passing through the LTTE
territory to the Jaffna peninsula are taxed at rates ranging from 5% to 25%
(ad valorem tax). All vehicles in the LTTE territory are required to
pay vehicle registration tax. All passengers travelling to the Jaffna peninsula
in privately run vans via the A9 highway are subjected to a unit tax of LKR
350 per passenger. Furthermore, the sale of property in the Jaffna peninsula
is subjected to taxation by the LTTE. A percentage of the proceeds of sale
have to be paid to the LTTE.
The people and businesses in the government held areas of the N&E
province are the most affected because both the GOSL and the LTTE subject
them to direct and indirect taxation. Thus, in practise, the consumers of
the province (who are the majority) are the ones who bear the cost of such
dual taxation as these taxes are built into the retail prices. In addition
to the foregoing taxes the LTTE demands contributions to their coffer from
Tamil and Muslim individuals and businesses from time to time in the N&E
and Colombo. Furthermore, Tamil businesses and individuals in various countries
are routinely asked to contribute to the tiger coffer. These are carried on
even during the time of peace.
The arbitrary nature of these tiger taxes is that no accounts of these
resources are shown to the general public. The taxpayers are unaware of how,
and for what, these tax revenues are expended. During the times of war these
taxes may have been justifiable because of the funds required for the war
effort. But, what justification is there for this comprehensive and systematic
tax regime during the time of peace? These tiger taxes are stifling entrepreneurship
in particular and economic revival in general. Needless to say, the tiger
taxes are one of the major impediments to economic revival in the N&E
province.
According to the author’s judgement at least LKR 5 million (50 lakhs)
revenue may be earned by the LTTE daily on the A9 highway by way of
taxation of passengers and goods. In addition, another LKR 2.5 million (25
lakhs) taxes may be levied per day throughout the N&E province
(including at Uyilankulam checkpoint) from people and businesses (both Tamil
and Muslim). Therefore, the daily total tax revenue of the LTTE in the N&E
could be about LKR 7.5 million (75 lakhs). This translates into annual revenue
of LKR 2,340 million (2.34 billion) [312 days X 7.5 million]. The LTTE is
involved in farming, fishing and several other economic activities as well
in the territory under their control. For example, the LTTE is reported to
be dominating the fish trade from the Mullaitivu district to Colombo. These
productive and entrepreneurial activities yield profits to the LTTE. If we
add these profits to their tax revenues the annual domestic income of the
LTTE could be at least LKR 3 billion (roughly USD 30 million), which I presume
is a very conservative estimate. In addition to this domestic income the LTTE
derives income from LTTE run enterprises and tax collected from expatriate
individuals and businesses around the world.
The revenue mobilised abroad may be used to purchase arms & ammunitions
in the international armament markets. Therefore, we shall focus on the domestic
revenue. According to the LTTE, the domestic mobilisation of resources during
peacetime, through direct and indirect taxes and entrepreneurial activities,
are necessary for the upkeep of their cadres. This justification is not convincing,
because during the time of war the LTTE managed to maintain their cadres with
far less revenue. The opening of the A9 highway and officially undertaking
political activities in government control areas of the N&E have provided
them a goldmine in terms of tax revenue. Moreover, the different tax rates
of the LTTE are very high compared to the tax rates prevalent in Sri Lanka
and that Che Guevara proposes in the Guerrilla Warfare. It seems a
mystery where the tiger tax revenue is going, because the LTTE does not seems
to be involved in providing public services to the people of the N&E whether
in the LTTE held or government held areas. In both these areas it is the Sri
Lankan government that is providing public services in education, health,
agriculture, irrigation, social services, etc, to the people.
In accordance with the MoU unarmed LTTE cadres are permitted to undertake
political work in the government control areas of the N&E. To the best
of the author’s knowledge the LTTE is mostly involved in only four activities
in government control areas of the N&E. They are: (a) recruitment of cadres.
(b) collection of taxes. (c) commemorating the martyrs and (d) harassing political
opponents. While the first, and third may be legitimate activities the other
two are unjustified. Disappointingly, the LTTE is not involved in any community
or public service in the government controlled areas despite a huge revenue
mobilisation effort. The people of Jaffna could be won over only by improving
their livelihoods and not by the above activities. The ordinary masses have
suffered enormously during the past two decades of war and wish to get along
with their lives in tranquillity and dignity.
A state or a de facto-state entity mobilises resources through taxation
not only to maintain its cadres, but more so to provide public services to
the population living in the territory under their jurisdiction. The LTTE
has failed to provide community or public services to the people whom they
claim to solely represent both in the areas under their direct control and
in the government held areas (which are under the indirect control of the
LTTE).
The LTTE has become institutionalised in the N&E province in the
past 12 years cultivating thousands of hectares of farmlands, running hundreds
of business enterprises, and employing thousands of people. The bulk of the
farmlands cultivated by the LTTE were forcibly taken over when the owners
of such lands were displaced internally or abroad. Proxies own the bulk of
the business enterprises run by the LTTE. A guerrilla army’s function is not
to cultivate farmlands for commercial purposes (except to feed their own cadres)
or run economic enterprises. Again it would be opportune to refer to Che Guevara;
“Private property should acquire in the war zones its social function.
For example, excess land and livestock not essential for the maintenance of
a wealthy family should pass into the hands of the people and be distributed
equitably and justly. The right of the owners to receive payment for possessions
used for the social good ought always to be respected, but this payment will
be made in bonds” (Che Guevara, op cited, pp79-80).
Instead of distributing abandoned farmlands and dwellings to the landless
and homeless poor of the N&E province the LTTE appropriates those property
with no compensation paid. In this way the LTTE has emerged as a major de-facto
property owner in the N&E province.
The LTTE levies taxes on goods being transported via the A9 highway
to the Wanni region (encompassing Killinochi, Mannar, Mullaitivu, and Vavuniya
districts) or the Jaffna peninsula at their checkpoints in Puliyankulam and
Uyilankulam. There are two checkpoints at Puliyankulam; one for people and
goods being transported to Jaffna and the other for people and goods being
transported to the Wanni. There is a third checkpoint at Uyilankulam for people
and goods being transported to Mannar district. These checkpoints are epitomes
of inefficiency of the LTTE administration. These checkpoints are overstaffed
and several tiger cadres can be seen seated in plastic chairs doing nothing.
The passengers have to get signatures from 3-4 persons at various points of
the checkpoints to get an entry pass. The goods are taxed at a percentage
of the price quoted in the invoice for purchase of such goods in Colombo or
elsewhere. The tax assessment is a lengthy procedure, which entails getting
checked, rechecked, and verified from 3-4 persons at various points of the
checkpoints. This multiple checking demonstrates the non-confidence and suspicion
the LTTE has on its cadres.
In the Jaffna peninsula a fear psychosis has set in due to the impending
LTTE regime. For example, some businesses in the Jaffna peninsula have hung
up two separate clocks in their premise; one showing the old time and the
other showing new time. Sri Lanka adjusted the time in 1996 (in order to increase
the daylight and save energy) by putting the clock forward by 30 minutes.
However, most people in the Northern Province did not adhere to this new time
mainly on the request of the LTTE. Most households and business premises still
follow the old time, which is 30 minutes behind Sri Lanka time.
The issue of having two separate clocks with old and new times is a
typical dilemma faced by the businesses in particular and the people in general
in Jaffna. This has profound implications for reviving businesses and kick
starting the dormant economy of the N&E. Though it is just a matter of
half-an-hour it reveals the uncertainty among the people as to who is in charge
of Jaffna; the GOSL or the LTTE. The people are sure of who is in charge of
the Wanni (which is the LTTE), and therefore all follow the old time. On the
other hand, in the Jaffna peninsula the government offices/institutions and
buses operate according to the new time, but private businesses/institutions,
Hindu temples, and households by and large operate according to the old time.
The clearest signal of the fear psychosis of the people of Jaffna is
that since the opening of the A9 highway there is an exodus of people from
the Jaffna peninsula to other parts of the country (not to Wanni), especially
to Colombo. According to the records of the Sri Lanka army checkpoint at Muhamalai
(which records each and every person entering and leaving the Jaffna peninsula),
during the first 7 months after the opening of the A9 highway there has been
a net outflow of about 65,000 people from the Jaffna peninsula. Despite a
large influx of internally displaced persons (IDPs) from the Wanni and other
parts of the country returning to the Jaffna peninsula, the total number of
people leaving the peninsula is greater than those entering. What is the cause
of this exodus?
The LTTE restricts the movement of people, particularly in the age
group of 15-35, from their territory to other parts of the country. Anyone
leaving the LTTE territory has to justify her/his travel and obtain a travel
pass. It is particularly difficult for obtaining passes for people in the
age group of 15-35 years. Though this pass system is a bit relaxed since the
signing of the MoU it is still in operation. A lot of people expect that this
pass system will be re-imposed in the Jaffna peninsula soon after the LTTE
takes control of the peninsula in a matter of time. The anticipated LTTE regime
has prompted young people (in particular) to leave the Jaffna peninsula, which
is ongoing.
The bulk of the migrants are relatively better educated and skilled;
therefore, this migration is further depleting the human capital of the peninsula.
Thus, the considerable number of net migration is undermining the human and
physical capacity of the peninsula to undertake urgently required rehabilitation
and reconstruction work. The dilemma faced by the donor community is that
even if necessary finance is available there is insufficient human and physical
capacity to absorb such donor assistance.
There also seems to be capital flight from the N&E province to
the rest of the country (especially to Colombo) in the past one year, because
of demands from the LTTE for contributions to their coffer. The LTTE modus
operandi is as follows. They would approach a supposedly wealthy person
and demand a certain amount of money. If that person responds by saying that
s/he does not have that amount of money, they would show a bank statement
of that person and demand the particular sum. This is not an isolated incident,
rather a quite common occurrence. Either the LTTE is able to obtain bank balances
of customers through the bank staff or they are intercepting bank statements
in the post. Either way the banking customers are terrified and as a safety
measure transferring their saving/fixed deposit accounts to branches outside
the N&E province particularly to Colombo. This is taking place among both
personal and business banking customers in the N&E province.
Since about the mid-1980s, as a response to the spate of bank robberies
in the N&E province, all the private banks withdrew their operations from
the province and only the state banks (Bank of Ceylon, People’s Bank, and
National Savings Bank) stay put. Even the remaining state banks operated a
skeleton service, by which only a part of the deposits by customers were lent
to borrowers and no fresh capital was infused to the banking system from their
head offices in Colombo. Due to war, displacement and lack of transport facilities
the number of actively banking population in the N&E dropped drastically.
As a result only a limited amount of deposits were made. Therefore, as a corollary,
the bank lending to personal and business customers dropped drastically.
This practise of lending what the banks obtain in deposits is still
carried on in the N&E province. Hence, the capital flight mentioned above
depletes the reserves that could be lent to potential borrowers. This may
be the main reason for the lack of bank finance to support businesses in the
N&E province in the past one year.
It is high time the LTTE realises that the type of regime they propose
to impose in the N&E (as demonstrated by their recruitment drive, tax
collection, harassment of political opponents, pass system, and time setting)
is undermining the economic revival in the province by creating political
and economic uncertainty.
The LTTE’s judicial system is also a deterrent to prospective investors
in the LTTE held areas of the N&E province. The prospective businesses
are not certain as to whether the Sri Lankan commercial laws or the LTTE laws
would apply to them. If there is a commercial dispute in the LTTE held territory
the prospective investor is not sure which law court s/he should approach
to resolve the dispute.
Generally, the LTTE’s public administration seems to be worse than
that of Sri Lanka’s. To begin with, the LTTE has not set up an independent
administrative structure as such. The LTTE has been using and manipulating
the public servants of the GOSL who are stationed in the territory under their
control to run a parallel administration. The administrative division of the
LTTE is largely manned by retired public servants of the GOSL and inexperienced
youths. The former seems idle and inefficient and the latter seem mostly school
dropouts. How can such an incompetent and frail administrative system handle
the task of rehabilitation and reconstruction?
The police service of the LTTE boasts of maintaining law and order
in their areas of control. We are told that there are 17 LTTE police stations
in the Wanni, 1 in Batticaloa, and 1 in Trincomalee. It is reported that,
on average, the LTTE police receive 15 complaints daily in the Wanni, which
pertains to minor offences such as petty thieving, land dispute, and personal
fraud. The LTTE police also claim that there is no underworld or gangsters
in their territory (Virakesari Illustrated Weekly, 06-10-2002).
The author is not surprised at these claims for the following reasons.
Firstly, there is hardly any incentive for crime to take place in the Wanni
because almost everybody is ultra poor and income inequality is very low.
The Wanni is like the plantation sector where absolute poverty is rampant,
but income inequality is the lowest in the country. Usually the crime rates
are high where income inequality is high. The people of Wanni are at a very
low-level equilibrium whereby severest form of poverty coexists with very
much less income inequality (a la Albania during communist times).
Hence, there is no incentive for crime to take place. Secondly, the reason
for lower number of complaints received may be due to non-reporting of crimes/offences.
This non-reporting in turn may be due to non-confidence in the LTTE police
and their judicial system. The claim that there is no underworld or gangsters
in the Wanni is understandable because prospective gangsters may have been
absorbed into the LTTE.
Therefore, the low crime rate in the Wanni as claimed by the LTTE police
does not seem to be a manifestation of their efficiency or control over the
population rather it could be a manifestation of lack of confidence in their
police and judicial services. The police and judicial services of the LTTE
are yet another major impediment to economic revival in the LTTE held areas
of the N&E province.
The Tamil Eelam Economic Development Organisation (TEEDO) claims that
it is due to their development activities the people of the Wanni were rescued
from starvation during the time of economic embargo between 1996 and 2001.
This claim seems to be very unconvincing. The people of the Wanni escaped
from starvation during the severe economic embargo because of the assistance
provided by international relief organisations such as the UNHCR, WFP, Care
International, Oxfam, et al, and the GOSL. The role of the TEEDO in
cushioning the negative impacts of the economic embargo was marginal, if at
all.
Despite huge revenue collection by way of various direct/indirect and
ad valorem/unit taxes the LTTE has not embarked on any socio-economic
programmes in the N&E province whether in their own territory or in government
controlled territory. Strangely, the LTTE is expecting the GOSL and the external
donors to undertake rehabilitation and reconstruction work. In spite of numerous
public pronouncements about LTTE’s proposed development plans for the N&E
province (Thinakural, 23-12-2002, pp6; Uthayan, 21-12-2002,
pp1; Virakesari, 10-09-2002, 14-12-2002, 17-12-2002) it has not forwarded
any rehabilitation and reconstruction plan for the N&E or how it intends
to fund such programmes.
In respect of the LTTE policy
of harassing political opponents in the N&E it may be useful to reflect
on the wisdom of Che Guevara;
“-----It is necessary to distinguish clearly between sabotage, a
revolutionary and highly effective method of warfare, and terrorism, a measure
that is generally ineffective and indiscriminate in its results, since it
often makes victims of innocent people and destroys a large number of lives
that would be valuable to the revolution. Terrorism should be considered a
valuable tactic when it is used to put to death some noted leader of the oppressing
forces well known for his cruelty, his efficiency in repression, or other
quality that makes his elimination useful. But the killing of persons of small
importance is never advisable---------” (Che Guevara, op cited,
pp62-63). “We sincerely believe that terrorism is of negative value, that
it by no means produces the desired effects, that it can turn a people against
a revolutionary movement--------------------” (Che Guevara, op cited,
pp140).
It is also interesting to note that despite huge collections of tax revenue
the LTTE has requested the government for financial assistance to open its
peace secretariat in Killinochi. It has also asked for import duty exemption
from the Ministry of Finance for the import of FM transmitter and accessories
(to run a FM broadcasting service) and a VSAT communication unit, which was
reportedly rejected by the Ministry of Finance. In this circumstance, the
taxpayers to the LTTE would like to know where the tax monies are going.
The LTTE is in possession of satellite communication for past several years,
and therefore the need for another VSAT communication unit (that too duty-free)
remains unexplained. Are there no more important and urgent needs of the masses?
Communication and dialogue are essential prerequisites for conflict resolution.
Therefore, the LTTE’s FM broadcasting service is timely, but certainly not
the duty exemption obtained by courtesy of the Norwegian embassy. Whilst acknowledging
the paramount importance of communication and dialogue we only hope the FM
radio broadcasting would be utilised for the professed purpose. The most potent
weapon of the LTTE has not been its suicide bombers, rather its very effective
propaganda. On the issue of propaganda it is appropriate to reflect on a bit
of advice for the LTTE from Che Guevara;
“One of the characteristics of revolutionary propaganda must be
truth. Little by little, in this way, the masses will be won over” (Che
Guevara, op cited, pp 131). “--------observing always the fundamental
principle that truth in the long run is the best policy” (Che Guevara,
op cited, pp145). “The radio is a factor of extraordinary importance.-----------However,
the radio should be ruled by the fundamental principle of popular propaganda,
which is truth; it is preferable to tell the truth, small in its dimensions,
than a large lie artfully embellished” (Che Guevara, op cited,
pp146).
There is also anecdotal evidence
of the LTTE appropriating building materials destined for the returning IDPs
in the Wanni. Good quality building materials sent by donors to put up shelter
for the returnees are reported to be replaced with thatched huts. It is also
known that the LTTE demands a percentage of the tender from contractors who
undertake construction work (shelter, roads, rehabilitation of irrigation
tanks, etc) in the areas under their control. Such types of appropriation
taking place during peacetime is unacceptable and a behaviour unbecoming of
the sole representatives of the Tamil nation. In this background, it is not
advisable for the GOSL and the LTTE to be the joint custodians of the donor
funds earmarked for immediate humanitarian needs and rehabilitation (and beyond)
in the N&E, because the track record of both in managing donor funds is
poor.
On December 01st the
LTTE banned the transport of historical and cultural artefacts from the Jaffna
peninsula to the southern parts of the country on the pretext of preserving
the symbols of the history and culture of the Tamil nation. Included in this
list of banned items are statues/figurines of Hindu religious idols, heirlooms,
memorabilia, bronze metal vessels, ola leaf manuscripts, vintage cars,
window/door frames and antique furniture (Virakesari, 01-12-2002; North
Eastern Herald, 06-12-2002, pp1). Although there is some rationality in banning
the commercial exploitation of historical and cultural artefacts, the banning
of the transport of vintage cars, window/door frames, and antique furniture
are unjustifiable simply because they have nothing to do with the history
and culture of the Tamil nation. The vintage cars of Jaffna (Austin A40, Morris
Oxford, Morris Minor, etc) are a relic of British colonialism in Sri Lanka.
Likewise, window/door frames, and antique furniture found in Jaffna are a
relic of Dutch colonialism in Sri Lanka. Hence, to ban the transport of these
items in the pretext of preserving the history and culture of the Tamils is
absurd. Furthermore, the LTTE seems to be playing the nationalist card as
and when it suits their political ends, because the LTTE members (including
the ones from the Wanni) don western attire while taking part in the peace
negotiations with the GOSL.
The act of banning the transport
of above items seems to be a manifestation of economic nationalism practiced
by the LTTE ever since 1990. The LTTE’s economic policies such as self-reliance
control of markets, etc, smacks of economic nationalism. It is high time the
LTTE spells out its economic philosophy unambiguously. This is vital for the
economic resurgence of the N&E province. The imposition of taxes, prohibitions,
etc, in ad hoc manner creates uncertainty among prospective investors in the
province. No business can prosper in uncertain conditions and no economy can
progress under economic nationalism.
Due to the insular economic policies
followed by the LTTE in the past 12 years in the areas under their control
the majority of the entrepreneurial class has migrated (either voluntarily
or involuntarily) from the N&E to the rest of the country (especially
to Vavuniya, Colombo and suburbs), particularly the Tamils and Muslims. It
is important for the LTTE to create a conducive environment for those who
were displaced to re-establish their businesses and invite them to return
to their places of origin. Although the LTTE has invited the Muslim traders
who were expelled (with just 24 hour notice) from Jaffna and Mannar districts
in 1990 to return it was too little too late. The LTTE should go further and
pay compensation to these entrepreneurs for the arbitrary and unjust expulsion,
because it is the LTTE who ransacked the business premises and homes of the
fleeing Muslims. This is the only way to show remorse and instil confidence
among the largest minority community in the N&E.
Another group of people the LTTE
should encourage to return to their homeland is the Tamil expatriates who
had fled the country during the past 20 years. These Tamil expatriates could
bring in their skills, knowledge and capital, which are woefully lacking in
the N&E. However, these expatriates are accustomed to an entirely new
way of life; including freedoms of thought, expression, and movement, which
they would expect to enjoy here as well. Therefore, it is the duty of the
LTTE to ensure such freedoms should the expatriates decides to return to their
homeland. The foreign donors also will be hesitant to put their money where
there is no accountability, transparency, and political and economic freedoms.
On the one hand, justifiably,
the LTTE is demanding the Sri Lankan armed forces to vacate the private dwellings
occupied by them in the N&E province without payment of compensation,
particularly in Jaffna. But, on the other hand, the LTTE is occupying deserted
private dwellings in Jaffna without payment of compensation. More so, presently
the LTTE is inspecting several private dwellings in numerous towns and villages
in Jaffna to take over. In this respect the predicament of the Jaffna people
has not much changed during the current peacetime. Disturbingly, the people
of Jaffna are faced with a situation where one tyranny is replaced by another.
Recommendations and Conclusion
The following recommendations
are made in order to revive the dormant economy of the N&E after 20 years
of civil war:
1.
The Sri Lankan armed forces should drastically
reduce the size of the high security zones in the N&E province, especially
in the Jaffna peninsula. This issue cannot be absolved in the pretext of national
security. The national security was not threatened during the period 1990-1995
when the Sri Lankan army was confined to the Palaly base in the peninsula.
It is very important for the Sri Lankan security forces to vacate all private
dwellings and lands in the N&E province in order to win the hearts and
minds of the population. It is also vital to withdraw fully from the city
centre of Jaffna in order to boost business.
2.
Remaining restrictions on fishing in the N&E
should be removed forthwith.
3.
The A9 highway should be open 24-hours a day,
7 days a week. Further, checking of goods on the A9 should be restricted to
just two points (one by the Sri Lanka Army and the other by the LTTE) from
the present four points.
4.
The traders in the N&E should be able
to engage in import/export trade directly. That is, they should be able to
open LC at the banks in the province. Besides, the Kankesanthurai and/or Point
Pedro harbours in the Jaffna peninsula should be developed and made available
for import/export trade directly with the rest of the world in general, and
with India in particular. For example, imports from India directly to the
Kankesanthurai and Point Pedro harbours would considerably reduce transport
cost. At the moment only cement is imported directly to the Point Pedro harbour
from India under an Indian credit line. Kankesanthurai harbour is out of bounds
for commercial purpose because of a Sri Lanka naval base there.
5.
The commercial banks (both state and private)
in the N&E province should be proactive in promoting businesses and productive
activities with flexible lending policies. Special circumstances such as in
the N&E warrant special services.
6.
The LTTE should refrain from taxing people
in the N&E. Instead it should ask for sponsorship from businesses for
community and social services for the needy.
7.
The LTTE should annually publish the donations/taxes
they receive locally and from abroad and how they are expended.
8.
The LTTE should dramatically improve their
governance – indiscriminate recruitment, harassment of political opponents,
occupation of private dwellings without due payment should stop forthwith.
9.
The LTTE should desist from undertaking economic
activities and running a parallel public administration (including police
and judiciary) in their areas of control. They should exclusively concentrate
on what they have been doing very successfully in the past two decades; that
is, defending the Tamil nation. Fighting a war is hugely different from managing
an economy and running a public administrative system. The latter two tasks
require completely different skills and knowledge, which the LTTE woefully
lacks.
10.
In general, the LTTE should drastically reform itself in order to qualify
to solely represent the nation of Tamils.
If the two protagonists of the civil war in Sri Lanka, viz. the LTTE
and the Sri Lankan armed forces, fail to remove the institutional impediments
to economic revival in the North&East province identified in this paper
it may be worth exploring the possibility of inviting an United Nations Peacekeeping
Force to be stationed in the province for the sake of the wellbeing of the
people and the economic prosperity of the Tamil nation of Sri Lanka.
Related writings
by the author:
1.
“Doing Business in the North&East Province
of Sri Lanka: Problems, Opportunities and Challenges”, June 2002.
2.
“Tigers, Taxes and the Tamils”, June 2002.
Muttukrishna Sarvananthan is a Research Fellow, International
Centre for Ethnic Studies, Colombo, Sri Lanka. The views expressed
in this paper are those of the author and not of the ICES. Corrections,
comments, and suggestions are welcome to 02, Kynsey Terrace,
Colombo-08 or sarvi@slt.lk
