Partly driven by high oil and food prices and partly by military equipment imports, the trade deficit has risen sharply. In January-March 2007 the trade deficit was $669 million. This year for the same period it was double that amount, $1,386 million. The government is scrambling to raise more foreign loans to pay for imports. The latest is a $150 million loan at commercial interest rates. These short-term loans will impose more burdens on future budgets when we have to pay interest on the loans and repay the principal.

Normally high inflation in Sri Lank should depreciate the value of the rupee so that our exports remain competitive. But large scale foreign borrowings keep the rupee-dollar exchange rate artificially high in favour of the rupee. Keeping the value of the rupee stable helps moderate inflation in Sri Lanka but does not help exports. Major export companies are complaining that they are losing income because the rupee is over-valued.
These economic woes underline the importance of ending the war as soon as possible to reduce the war expenditure so that the economy has more wiggle room to cope with the fuel crisis.

The government appears to believe that there is scope for reduction of oil consumption. The recent sharp increase in petrol and diesel prices may cause some reduction in demand in the short term. In the medium term when the hydro and coal-fired power plants now under construction come on stream it may be possible to reduce oil imports but not by much.
The bitter truth is that in the short term there is little scope to cut back on oil consumption. In fact in international comparative terms Sri Lanka uses its energy relatively efficiently. We produce about $8.3 worth of output for each kilogram of oil or oil equivalent energy that we consume compared to, for example, India's $5.5 and Pakistan's $4.2. So if the oil price goes up and if we want oil to keep our economy humming we have to cut back spending on other things and give more money to the oil suppliers to buy the oil we need. It is as simple as that.
In 2007 we spent about $2350 million or about 21% of the import bill on oil when the price of a barrel of crude oil was $72. Today the price is almost double. In the recent past increases in oil prices have not caused a reduction in oil consumption in this country. For example, between 2003 and 2007 the price of oil steadily increased by 140% from $30 per barrel to $72 per barrel. But oil consumption increased by about one third during the four year period. The recent increase in the oil price is so sharp that people may cut back on travel and other oil-based activity. But that will hurt local tourism, transport and related businesses. Economic growth and jobs will suffer.

Given high world oil prices in the long term, ad hoc manipulations in petrol prices, poorly conceived subsides to satisfy make some interest groups and ridiculous kneejerk reactions such as banning of 100 watt light bulbs won't solve our energy problems. We need a sound energy policy that must take into account both the global energy situation and Sri Lanka's development goals.

The national energy policy must be integrated with the broader development strategy. First we have to have a viable mix of sources from which we generate energy. Second, the energy policy must help ensure sustained and sustainable economic growth. Third, given the importance of energy in the economy from transport to food production and much else in-between the poorest 20% of the people who live below the poverty line must be provided with an economic safety net to protect them from the adverse impact of high energy prices. Fourth, the nation must have an environment friendly, economically sustainable and socially beneficial national transport policy that gives priority to high quality public transport.

To formulate such a policy we will have think more innovatively and overcome strong vested interests including reactionary trades unions that oppose any kind of sensible reform. Difficult times lie ahead for the nation.

Kandy Heritage: A Response to Asmin Marikkar
By Harindra Dunuwille

As a former Mayor, Chairman of the Kandy Heritage City Committee and Member of Board of Directors of the World Heritage City Organization, I would like to respond to MMC Asmin Marikkar`s interview in the May 2008 issue of `The Kandy News`.
I agree with Mr. Marikkar that Kandy city needs to be decongested. The Greater Kandy Development Plan formulated during my tenure – popularly known as the “Bulankulame Plan” - seeks to achieve just this. This plan was presented to the Government through the UDA and to the Provincial Council. We even had a two day seminar on it with the participation of representatives of almost all the key stakeholders to critically review the proposals and persuade the government to implement it. The usual promises were made by the government leaders and senior officials who were present. But nothing has happened to date.

I also agree with Mr. Marikkar that Kandy does not need more new large buildings that will attract more people than what the city could cope with. The “Kandy City Center” – the massive new building complex next to the Food City - should not have been allowed. It has obliterated one of the best scenic views of the city - the Lake and mountains. If and when it becomes operational, it will cause even more severe congestion in the city. Similarly, as Mr. Marikkar rightly points out, if the vacated Bogambara Prison is converted in to a shopping complex the congestion will be compounded.

Kandy was declared a UNESCO World Heritage city – globally there are little over 850 Heritage Sites and Cities of which a little over 100 are cities – in 1986. As the term itself implies Kandy is a part of the World Heritage and it casts a heavy responsibility on those who administer the city to preserve it for posterity.

But most of the World Heritage Cities are in the fortunate position of being ancient cities with little contemporary utility functions. Thus they can be conserved in `splendid isolation`. Unfortunately, Kandy is not in that happy position. We have to balance the demands of a “living” world heritage city with the preservation of its heritage. That means we have to cope with the forces of modernization while conserving the city’s historical heritage.

Mr. Marikkar refers to the history of the city to identify what should be preserved. He is absolutely right to refer to history although he and I may not agree on what deserves to be preserved. Let me recount the historical context very briefly to make my point.

The Kandyan kingdom was ceded to the British upon a written contract called the Kandyan Convention wherein the British were obliged to safeguard the Buddhist religion, the clergy and honour the Kandyan laws and customs. In addition, especially relevant to the present discussion is the commitment that the British made to protect all places of worship namely the temples, monasteries, shrines and monuments.

There was revolt in the Kandyan Provinces in 1818 to chase away the invading British rulers. The revolt was brutally put down. Thereafter the British unilaterally abrogated the convention and used Kandy first to consolidate its hold on power and later as a trading town for the coffee plantations that were opened up by them. It later developed as a commercial and administrative hub which it remains to this day.

Although the British did not demolish the buildings of a religious nature that I mentioned above, they were not maintained in an adequate state of repair.

The Palace complex was preserved. But almost all of the old mansions were pulled down to make way for new buildings. These were the buildings that we lost under the British. There were no other significant pre-1815 buildings in Kandy.

The British, however, built some imposing land mark buildings which reflect the colonial architecture. The rest of the city was built up with small houses within an area of about 4 square kilometers and along ten streets that form the city centre. You will see that the city `grid area` as it is called, is extremely small in extent and it is within this small area that most of Kandy`s Heritage Buildings are found.

Thus, we find in Kandy a few ancient buildings of the pre British era and the newer building of a completely different character of the British period. The two together have given Kandy its unique character – described as a delicate built fabric – and these are the factors combined along with pre British edifices, the two forests, the Lake, the arts and culture, indigenous to Kandy that have given us our World Heritage status.

A city population of 15,000 in 1815 grew to 50,000 in 1948 and 160,000 in 2001, a tenfold increase over almost 200 years. Given the very limited land area of 26 sq/km, Kandy has a population density of over 6000 per sq/km. Given the hilly character of the topography, it has resulted in an acute scarcity of buildable land.

In the period before 1978 when there was no proper and serious control over building activity, we saw haphazard and unplanned building construction. With opening of the economy in 1977, there was a spate of indiscriminate building activity often with the use of concrete, aluminum and glass. These included Government buildings such as new school buildings that never sought building permission, commercial establishments, banks and office buildings. Since then the laws and regulations have been tightened and with the status of a Heritage City, greater control was exercised after 1989 and especially with the formation of the World Heritage Advisory Committee in 1992. Stricter regulations were formulated in the late 1990s which are now in force.

The Municipal Council in collaboration with the Urban Development Authority formulated a Development Plan for of Kandy which has Planning and Building regulations approved by the Minister. This is a sequel to the Master Plan on Conservation and Development of 1999 prepared by the Central Cultural Fund together with Kandy Municipal Council and the Urban Development Authority.

With the establishment of Provincial Governments in 1987, Kandy became the Provincial capital. New buildings came up to house the new second tier of government administration. The expansion of the bureaucracy also attracted more people to the city for business and residence.

The city centre of Kandy has become extremely congested in the past two to three decades and is unable to expand owing to its geographic constraints. The demand for more commercial and business buildings and for residential housing units on the hill sides is ever present. Fortunately, an unwritten law that there should be no construction that goes above the Holy Temple of the Tooth has spared Kandy of high rise monstrosities, and today there is a limit on the height of buildings in the grid area of the city.

In 1984 an area around the Temple was declared as a sacred area with special building and planning restriction. In 2001 this area was expanded slightly and the uses of the area have been restricted as well. All this is to help preserve the sanctity and dignity of the most venerated shrine of all Buddhists. The transfer of the courts complex to a new facility on Gopallawa Mawatha has helped ease the congestion around the Temple.

The multi storey car park in the city centre was supposed to ease the traffic congestion in the city centre. Unfortunately owing to unresolved management issues this has not yet been fully realized. If and when parking and vehicular traffic is significantly reduced in the city centre Kandy will reclaim its charm and the precincts of the Temple will become a tranquil and serene area, conducive to and in harmony with the spirit of Buddhism.

The KMC administration needs to have the support and cooperation of its citizens to effectively manage and strike the necessary balance between modernity and conservation. Towards that end, it used a questionnaire to verify citizen opinion before finalizing the Conservation and Development Plan in 1998.

During my tenure as Mayor we formed an Association of Heritage Building Owners whose buildings have been identified for conservation owing to their special features. About 480 such buildings were identified and a special plaque was affixed on the front wall of these buildings. Some of the owners are not happy with this status because it means that the facade cannot be changed. Neither can the buildings be demolished and replaced with high rise, larger and perhaps more profitable structures. But they will have to make that sacrifice in the interest not only of the city and of the country but of the whole world. The city administration can give incentives to the owners by way of property tax concessions, assistance in the drawing of plans for renovation and expansion and making them tourist attractions, as has been done in other World Heritage cities.

The schools in Kandy have been encouraged to form Heritage Clubs and the response has been encouraging. Eminent scholars have motivated the younger generation of the value of the heritage of Kandy.

During my tenure we drafted and placed before the government a “Kandy Heritage Foundation Act” to give greater autonomy and freedom to the Foundation to act to preserve the heritage of the city whilst allowing it to collaborate with local and foreign organizations and institutions to promote the Heritage City activities such as conservation. Unfortunately the proposed law is yet to be enacted.

Finally, the Greater Kandy Development Plan that we formulated in the 1990s, or something along those lines, must be implemented to preserve Kandy. I very much hope that Mr. Marikkar and his colleagues in the present Municipal Council will reactivate these matters and have them addressed by the Central Government and Provincial Council.
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The author was the Mayor of Kandy (1997 to 2001). Some of the ideas in this article were first presented by him in a speech in September 2003 in Chengde, China on being invited to address the 300th anniversary of the founding of the Imperial Mountain Resort of Chengde which is also a UNESCO World Heritage city.