Sri Lanka: This battered resplendent isle

OPINION. The emails and messages keep “pinging,” people asking with earnest and mounting concern about Sri Lanka – what they see on their screens or read in the press.

By Omar S. Kahn (Uncommonwisdom.online) a global citizen. Born in Cairo, a US citizen, having lived in Germany, the US, Kuwait, Saudi Arabia, the Netherlands, the UK, Japan, Sri Lanka, Pakistan, Singapore, and Dubai. | The article was previously published on FT News

It is the structural nature of the crisis, at a time when the world is also reeling. “Confidence” literally translates to “with faith.” It would more likely be present if there was the perceived capacity to execute on stated aims as openings emerge, rather than to keep swirling around in militant debate, empty rhetoric, and sloganeering.

Perhaps even more profound than a foreign exchange crisis, an energy or fuel crisis, there is a fundamental crisis of confidence.

My love of Lanka

When my wife and I first landed in 1993 on behalf of an American Express regional Conference as consultants, we were quickly besotted by the charms of Serendib, as so many are.

We became fast friends with legendary hotelier Gamini Fernando, whose Colombo Hilton of those days, was easily akin to the Shangri-La here today. Gamini galvanized a generation of Sri Lankan hospitality stars and invited us to partner with him in reinforcing the culture he so admirably embodied.

We also had the privilege to work with many leading lights, from Ken Balendra and his Directors across Keells, to the Hayley’s companies, to the Coorays as they expanded Jetwing and so many more. It made little strategic sense initially for us, operating as we were in more “developed” markets across Asia and the Middle East, but we created a company here (Sensei Lanka), and the intoxicants of Lanka’s charm, beauty, and ethos, added palpably to the growing value of the business we did here.

So we are not disinterested analysts or outsiders. We were away, but for a few landings for almost 17 years, and on our return, were enchanted once more.

For all the dispiriting headlines, the global humiliation of a national meltdown, unprecedented inflation, it remains a fact that people who have lived here, or visit here, go back just pining to return. An expatriate who arrived recently was worried given the optics. But he was told by those who had preceded him, “Don’t miss the opportunity to live there.”

This deserves some study. We need to harvest this “secret sauce” and leverage it. Were it not for our stifling bureaucracy and visa regime, ask any multinational where they’d rather establish in South Asia.

In fact, ask anyone in South Asia where they’d prefer to live and conduct business. But seven months to get a visa for needed talent for even an established business much less an aspiring start-up (par for the course) will drive away even the most zealous.

Bengalis who alight here, bubble with enthusiasm, as Lanka’s charms and Colombo’s relative cosmopolitanism, seem so seductive. And yet, it is Bangladesh, facing the same pandemic realities, who has already provided a $ 250 million credit swap with us, once deferred repayment, and is being asked for another similar sum.

Most countries in the region have over this period built up their reserves. We have depleted them. And among other things, there’s the rub.

All cultures were once hierarchical, most still are, despite surface gloss. The US Presidential model has become increasingly “imperial.” Most global corporations speak of “coaching” and “empowerment” and practice “directives” and encourage “followership” more than “leadership”.

Civil War ruminations

One of the things I admired was the Lankan resilience and grace under fire we observed in our decade-long time living between East Asia, Dubai, and here (1993-2003).

I was writing my first book when the Central Bank bomb went off next door to the Colombo Hilton. For the next few days, we were doing “crisis recovery” sessions for Ceylinco and KLM, as many of their staff were understandably shell shocked and terrified of returning to the Fort.

We had helped coach the opening team of The World Trade Center with their Singaporean developers. And after the Galadari bomb, we had to work with them as they dealt with the challenge of being among the biggest targets in the country and seeking to inspire businesses and retailers and patrons not to abandon their newly established iconic appeal.

There were many other such crisis points. We marveled at the resilience of the people, and the fast-rebounding willingness of tourists and others to return to this tragically beset paradise.

Lanka’s spirit remained unbowed, courage flowed, people stepped into the breach, again and again, businesses still grew…yes there were handicaps, and setbacks, troughs aplenty amidst the peaks, but it was a masterclass in recovery and engagement under pressure.

So, once more, we chose to stay in Lanka over the COVID period and write and coach and work with and through our team here. When people said to me, “You are lucky to be here,” suggesting that we were cowering here, and far better to cower here with lower cases and deaths, I found that both incoherent and borderline offensive.

We loved Lanka in the midst of the civil war, we never stayed away. We went back home to the US after 9/11 and wanted to be part of that recovery.

Now, on return, an overhyped pathogen, akin to a median influenza year when you unpacked all the statistical detritus, was hardly our “inspiration” to be here.

We have always felt “lucky” to be in Sri Lanka, the coronavirus has never had anything to do with it.

On return, we found after the Easter bombings by the end of 2019, tourist numbers had almost recovered despite the cataclysmic impact on what had just been honored as the “world’s favorite location” in Lonely Planet and elsewhere.

You cannot though keep mining for infinite patience and resilience among the populace, especially when the real devils were increasingly self-inflicted wounds.

Chronic economic mismanagement

Sri Lanka has been running a trade deficit for decades, and an undue amount of the foreign exchange reserve was used to pay for the cost of imported items.

Today, we have primarily a foreign exchange crisis – all the other crises come from being unable to pay, or for banks to provide global financing. The foreign exchange reserves were already declining perilously by 2019, reaching a true nadir by November 2021, when there was enough currency to support one month’s imports.

The country had been chronically borrowing foreign funds to fill its reserves instead of boosting its exports. The local industry did not develop, but foreign debt mounted. With pandemic handling adding to this, the country’s public debt went from an already unnerving 94% of the GDP to 119% of GDP and more as per the IMF by 2021.

Bizarrely, the current Government immediately reduced taxation virtually upon coming to power, reduced Government revenue when major loans had to be repaid when the tourism industry was just “starting” to stabilize, and cash reserves were clearly inadequate.

Things have since gone from bad to worse, even though the trend of debt financing has been the case essentially from 1978. Earlier loans were at concessionary rates, then increasingly at market rates, as various thresholds were breached.

Then we had the madness of 24/7 curfews, the most repressive varietal of “lockdown” engaged in for months and reinstated at every pseudo-medical whim. This even though we soon knew we were dealing with an airborne pathogen that had already spread, and where virtually all infection was taking place indoors globally (the majority in hospitals and care homes).

Before more targeted, regional, and zonal “lockdowns” were practiced (also largely beside the point, but a far better recourse), we had racked up an economic cost of at least $ 1 billion in the first few curfew months. Businesses collapsed, economic stresses got diverted to banks, and we went on a mad rupee printing spree for a currency not globally sought like the Dollar or even the Euro.

This was further compounded by Government sector salary increases – beyond baffling – and the utterly unhinged abrupt stopping of chemical fertilizers which laid waste to multiple industries (we refused to consult the EU experience, where after decades of seeking to achieve this transition, a global “best case” was 15-20% of the fertilizer use being organic). Then came refusing to go for debt restructuring, “holding” the rupee at 200 since August 2021, and then floating it overnight with no warning or planning, leading to shockwaves this beleaguered, battered economy could ill afford.

Why don’t we create a national scorecard for what “first world” means to us, and then execute, and engage the world accordingly, drawing our best talent to advance these aims and posit rewards accordingly? It would change the narrative; it would draw the world to us. Do we dare? It seems we have tried hubris, and received, inevitably, nemesis. Perhaps we can light that Promethean flame and together, by its guiding light, see what we might be made of, and therefore capable of.

“Culture” is developed not given

In my consulting life, I am often asked to define “leadership.” The best definition I’ve been able to offer is “Leadership is the value you add to the assets you’ve been given.” And then I add a leader is a “servant” to those they serve, enabling them to deliver on aspirations that bring value to stakeholders.

I’m sometimes asked if the trouble is not somehow endemic to South Asian, perhaps even Sri Lankan culture, if we are not just too resolutely hierarchical and “top-down” oriented to practice “servant leadership.”

All cultures were once hierarchical, most still are, despite surface gloss. The US Presidential model has become increasingly “imperial.” Most global corporations speak of “coaching” and “empowerment” and practice “directives” and encourage “followership” more than “leadership.”

Gamini inspired and empowered the Hilton team, so many of whom have blossomed into senior hoteliers, chief executives, and entrepreneurs. He achieved this in the midst of civil war and working with the same human timber.

Culture is a set of assumptions we make real and demonstrate behaviourally, in concert. Every culture is perfectly designed to deliver the results it currently does. So if today’s results are appalling, overhaul the “culture.” It’s not DNA. The rice farmers of Japan created an East Asian economic miracle and exported kaizen globally, expressing and also transforming their culture.

Too much of India don’t have clean running water, yet pockets are leading IT hubs. The difference is the tacit competence generated in the latter, the behaviors and reflexes honed, the benefits and rewards available, the networks and relationships established. This patchwork quilt is culture writ large.

There is no button to push. We must invest not just in so-called “human capital”; we have to invest in “relationship capital.” I was told once, “You cannot achieve and sustain results larger than the relationships on which they’re based.” This is true between those who govern and the governed, and it is true throughout the entire latticework of society.

COVID derangement

Well, this was a microcosm of how not to handle the crisis. As I have written incessantly on this seeking to revive a sense of reality and proportionality here, let me just itemize the ingredients of our folly here.

First, the Oxford Stringency Index highlights 9 parameters of “locking down” against a 100-point scale of “stringency.” Results show an inverse relationship globally between the degree of stringency and public health outcomes. Whereas most of Europe was hovering between 40 to 50 points, Bangladesh at 52, Sweden down to 38, the UK in the 60s, Lanka was the world’s most stringent (around 86, finally overtaken by Palestine), though having nominal cases and no real change to overall mortality.

So, we shot ourselves in the foot, and then fired a few more shots at other anatomical targets to make sure we really hobbled ourselves!

We forgot that economic bankruptcy is not a medical strategy. And poverty will kill you far more decisively than a pathogen with a global 99%+ recovery rate for anyone not above 65 with multiple comorbidities.

Second, it was a highly age-stratified illness that most recover from. Not a basis to panic and annual economy and society.

Never in history have we locked up the healthy. As animal reservoirs are involved, there is no scientific basis for assuming COVID can be eliminated (only smallpox ever has been, and no animal intermediaries were present, only humans contracted it). Hence it has to become endemic. As such, we are only delaying natural immunity proliferating, by locking people up.

Children were and are at nominal to no risk, the US indicates not one instance of a healthy child has died. Sweden kept schools open throughout with no impact on the spread to children or adults. Other European countries followed suit, and then the multiple US States since September 2021. We refused to learn from any of these.

Unwillingness to hear about or learn from successful global treatment protocols for the small percentage at heightened risk added to the confusion.

We had ridiculous adherence to “masking” when all randomized trials show nominal to no benefit or impact. Masked countries have continued to have skyrocketing infections.

We also had slavish adherence to a clearly flawed “non-diagnostic” test, the PCR (confessed to being non-diagnostic and not suitable for mass testing of asymptomatics by virtue of its own paperwork), with no national standards of amplification (Ct, cycle thresholds), even after the WHO clarified it cannot be used as a sole means of diagnosis.

While the Maldives continued to have record tourism, we did not avail of our opportunity to create our own progressive, fact-based invitation for tourists, or even to partner with many airlines headed to Maldives, even when this was clearly offered. We preferred to cower from Covidian propaganda.

We kept shutting down at every surge! With no benefit, “cases” (positive tests often with no symptoms) were chased, along with dehumanizing quarantine camps (finally shelved, allowing for home treatment and telemedicine). All of this dampened economic activity and left businesses unable to plan, or imposed costs that rendered them uncompetitive compared to their regional neighbors in production, manufacturing, and otherwise.

Voodoo economics was trotted out forecasting on no rational basis whatsoever that if we shut down long enough, absorbing further billions in losses, we would somehow “rebound” though there is not one economic case study globally of this having happened, nor any rationale for expecting it to.

Communication debacles abounded of saying we’re not shutting down, and then a complete about-face when some pseudo-medical derangement about locking down or alleged “vaccination benefits” was asserted (we now clearly know the “vaccines” may suppress serious symptoms in the short run, but the efficacy wanes, and they don’t protect, admitted to even by the Pfizer CEO and proponent Bill Gates, against reinfection or spread).

This demonstrates that we cannot decouple responses from realities, data, or benchmarks of those who are succeeding, without catastrophic cost. Sri Lanka has to apply its own wits, as other countries across South Asia and much of Africa have.

“Magical thinking” runs out

So, we have exhausted “magical thinking.” The idea is that if we avert our gaze and keep doing what does not work with greater passion and greater chest-pounding it will work. For example, realizing we need to import items to make tourism competitive, much less attractive, we need to find ways to do that, and get more tourism income in foreign exchange.

We need to drive exports strategically. We have to urgently mitigate the impact of backfiring policies on the garment sector, the tea industry, and more.

And we cannot keep “borrowing” indefinitely or trying to “swap” our way out.

Some frameworks must be proposed, we cannot just say “Get out” to the President and have no recommendation of how we move forward. How will the country operate? How will pressing needs be addressed? What will be the legality of any such actions? Who, as duly appointed Finance Minister will go for the IMF meeting in Washington later this month?

Answers must be generated, and they must be constitutionally stress tested. This is not the time for national tantrums.

If, as was suggested in these pages, a Commission was established, answerable to Parliament, and commissioners were appointed for crucial national tasks ranging from re-calibrating the authority of the Executive Presidency, confirming IMF arrangements and/or a multi-donor consortium, creating mechanisms for good governance going forward, establishing not only sane foreign policy but a domestic and global communication strategy based on credible commitment, re-establishing judicial independence, creating and executing a strategy for addressing fuel and energy in the short and medium-term (some excellent ideas were fielded recently by the Ceylon Chamber), establishing accountability for alleged misdeeds, conducting a truly independent probe into the Easter bombings, all this would be compelling.

The range of the commission’s accountabilities could be detailed, and then some clear, unambiguous metrics should be provided to demonstrate “success” or “completion for each task.” The commissioners as was suggested should be unimpeachably solid in the subject areas, fully accountable to Parliament.

The aim is to stabilize the country economically, and then make it viable to consider fresh elections, without capsizing what modicum of national functioning we currently have over ever more intemperate and escalating expressions of outrage, however, justified.

A new vision…a fresh scorecard

Why not a new vision for Sri Lanka? Why not, in the spirit of Kennedy’s moon shot (We will put a man on the moon safely in a decade): “Sri Lanka will be a first world country in a decade.” Audacious? Outrageous?

After having been hit with two nuclear bombs, occupied, humiliated, with no natural resources, and having to import everything, Sony in the 50s, stated its vision, “To make ‘made in Japan’ synonymous with quality.”

This was when “made in Japan” meant “shoddy goods delivered late.” And this implausible aspiration, and others like it, propelled Japan to be the world’s second-largest economy for decades, and even today, the world’s third-largest economy.

Lee Kuan Yew took a malarial swamp in the 70s and by the 90s “Singapore Inc” had a higher GDP than Great Britain. Of course, they came to get inspiration from Lanka in the 60s, which shows how quickly nations can rise or fall. He took dramatic action in terms of minimum wage, draining the swamp, establishing the rule of law, pushing for meritocracy, and more.

Why don’t we create a national scorecard for what “first world” means to us, and then execute, and engage the world accordingly, drawing our best talent to advance these aims and posit rewards accordingly? It would change the narrative; it would draw the world to us.

Do we dare? It seems we have tried hubris, and received, inevitably, nemesis. Perhaps we can light that Promethean flame and together, by its guiding light, see what we might be made of, and therefore capable of.

By Omar S. Kahn (Uncommonwisdom.online)