Friday, May 13, 2016

The statistics on which much research and policy is decided is misleading!

Sri Lankan policy makers and planners as well as independent researchers are slaves to statistics from the Central Bank and the Department of Census and Statistics which for years have merely collected figures, WITHOUT a thought as to what they meant, or how they could in reality be interpreted.

Let me outline some of them.

1                      All foreign passport holders arriving in Sri Lanka are included in the Tourist arrival numbers. How many of them are of Sri Lankan origin? How many have dual nationality and how many are NOT genuine tourists, who just come to SL 6 times a year to stay in their home!. No one can give an answer to that yet, nor even provide a rough guess, based on empirical evidence.

2                      30% of the people are considered farmers, but less than a tenth of them actually rely on farming for their primary source of income! They may have other jobs, or their wives in the Middle East may be the primary breadwinner, whilst the income they derive from working their land is less than 10% of household income. No one has looked into this issue.

3                      More than three million Sri Lankan citizens live overseas, and the Govt. does not have ANY idea how many, and where they live, and they did not get counted in the ten yearly census last taken. Their details are VITAL for policy planning and decision making.

4                      US$3B come annually to Sri Lanka, by channels outside of the banking system and don’t get recorded in inward remittances, and are completely missed on ALL statistics that the Finance Ministry and the Central Bank use to make assumptions for exchange rate and Balance of Payments policy.

5                      As a result of the above, the daily loss of about US$6Million out of Sri Lanka, be it smuggling currency out or people paying this directly to third parties in foreign countries who then give the rupees in Sri Lanka is also not recorded, as both are lost in transit!

6                      The problem in 5 above is that the massive money laundering in drug money is in this area, where the drugs come in and they are sold to local people who then pay in rupees, which are then sold for foreign currency out side the banking system, and then is smuggled out. Another is that these drug rupees are given to local people whose relatives give the dollars in the Middle East to an intermediary, who then reimburses the drug lords out of that overseas without the cash coming in or out of Sri Lanka.

7                      When the annual household survey is filled out which forms part of the electoral register, one is supposed to fill in the name of the relative overseas and state that person is abroad. However most do not fill them, as they are NOT sure whether they have to, as there is also a question as to which household that overseas dwelling person should be included in or some other issue of not having a home. They are therefore completely lost to the system.

8                      Balance of payments are completely erroneous, because so much of the invoices are not correct due to under or over invoicing for all sorts of purposes be it to pay lower duties on imports, or hide money overseas and so the figures on which policy and exchange rate decisions are made are erroneous and efforts are NOT made to estimate what this leakage might be to be able to take corrective action, or reduce the incidents of such.

9                      There are many payments made for overseas goods and services from Credit cards in Sri Lanka, and some of it is for Education also in overseas countries, and sometimes students use their parents credit cards to draw money, and how this appears in the statistics is also not clear.

10                 Then there are Sri Lankans who travel overseas, and either take exchange from here, and also use ATMs overseas to draw money. The tickets are usually purchased locally which have to be paid for to an overseas agent or airline, and there are funds transferred out. Whether is appears in goods or services is a question, and also in calculating the Trade Balance, whether NON_ TRADE items are included there is also a question.

11                 The Tourist Industry includes, inward currency exchanges in Sri Lanka, and Tour Operators transfer of funds to their Agents in Sri Lanka for payment of bills. Then there is the foreign element of a holiday, such as the airline used, and other foreign payments. Then there is the imports of consumer and capital goods for this industry, be it food for daily consumption or imported kitchenware for the Hotels, these also need to be captured correctly in order to determine the true benefit of tourism to Sri Lanka, if any!

12                 The true investment in Housing Stock when many illgotten gains go into building a house or houses, and don’t get recorded anywhere as the money is not shown as income, but the expense in shown as costs.

The above examples are clear indications of how we use statistics can affect how we make decisions on certain matters, especially when they are matters that affect the long term policy decisions that affect our lives. In short the Black Economy, here I mean the unrecorded one, plays a vital role in the growth and prosperity of our people, but to what extent it helps and harms is unknown.

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