When was the last time you had a shoeshine?
Not my best photograph, but I like it. This was within the Colombo Fort.
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Colombo is a hard city to love. Dusty, dirty, chaotic, ill-maintained. I got cheated for USD55 on the first day there and that soured my mood badly. And oh, the honking!
But the city facing the full might of the Indian Ocean is colorful and lively. There is a chaotic order imposed from the ground-up. There are surprises around the corner if you are willing to brave the sun and walk down the roads.
Colombo shows how a city is like without malls. There are malls in the Sri Lankan capital of course but they are nothing like in Bangkok, Kuala Lumpur, Jakarta and Singapore. If you arrived here from a relatively prosperous Asian city, you will be unimpressed with Colombo malls.
Given the relatively lack of large malls, this means shops open at the street level, making the road busy with people on workdays even under the hot tropical sun. Such busy streets full of pedestrians are not unique to Colombo of course — you can see such street scenes in other Asian cities too — but there is something charming about it in this city. The narrow opened-air streets make it all the more liberating.
(By the way, whose idea was it to have that ugly green roof over Kuala Lumpur’s Petaling Street and Masjid India? Mr unelected Mayor, tear down that roof).
And the signs! The signs are everywhere, almost Chinatown-like.
I have always felt street level shops make a city more human. It creates things to see in the open air.
In contrast, dull big structures are all a stranger to a pedestrians and kill off foot traffic. Just move along. Just move along until you get to the entrance and disappear in the monstrous controlled malls. Such malls have its functions but they are just not a place for an adventure.
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[2827] That kid on the Galle train
I have just returned from my Sri Lanka backpacking trip. I needed that vacation but now that it is done, I am suffering from a mild holiday blues. It is a kind of depression that makes you go back to your photo collection and relive the journey.
I took a train down to Galle from Colombo with a newly made friend. The train was full and we had to sit by the door, close to the stinky toilet, which was really a room with a hole on the floor. Yea, when the train stopped, it did not smell nice at all.
But the train stopped often between the two cities. Though it was nothing out of the usual, curiosity led many to pop their head out the window, including this kid.
Sigh… I need another vacation to recover from the blues.
Oh fuck it. I can do this from my phone.
Imagine a bus. Not the docile Blue Buses in Ann Arbor. Not a Greyhound. Not the bus to Bondi. No sir.
Imagine a bus without air-conditioning zooming across the tropical central Sri Lanka, manufactured probably in the 1980s, somehow surviving almost four decades of abuse by driving maniacs.
Close your eyes. Imagine a bus so packed of people cruising almost impossibly at 70-80-90km/h. Imagine a Lanka-Ashok-Leyland bus. It looks like an old Tata bus that reigned terror in the streets of Kuala Lumpur in the 1980s.
I am standing dangerously by the door. Trees, houses, dogs, lamppost and gods rush by and blur outside.
Inside the hot long metal tube vehicle, I am leaning painfully against the metal side of a seat. My hands are holding on to the above railing, and to my dear life. Immediately in front is an old woman with her oversized bag, conveniently pressed against my groin.
Beside her and next to me are two Sinhalese men. Their sweaty shoulders meet mine.
Behind me is Julien the German and behind him is his girlfriend Annie. We met at a lonely bus stop in Udawalewa, where we waited almost an hour for a bus to Wellawaya, before having to change bus to Ella. Three lonely backpackers just could not ignore each other for long. I for one was relieved somebody else needed to get on the same bus to the same destination. I needed a confidence boost and traveling companions help.
“What’s your name? I’m Hafiz.”
“Ouugen.”
“Youngen?” I mishear.
“No! Youlien,” he almost smiles.
“Julien?”
“No! That’s French! In English it’s Julian. In German, it’s Julien.” He clarifies.
Yea, I am not doing this right.
“And I’m Annie,” she laughs after the whole effort at communicating in English. ” A Sinhalese told me in the local language, Annie means to stab.”
Okay.
That was an hour ago before we boarded the bus, now traveling what seems to be at warp speed.
They say when you travel at such a speed, you would have you body mass stretched. I beg to differ. Those rationalist physicists know nothing. I the empiricist am being crushed in the bus.
If all these scientists want to learn the ultimate secret to space travel, they only need to come to Sri Lanka. After all, Rome was only a child when the Sinhalese built Sigiriya and Anuradhapura. Sri Lankans know something!
Yes, and the warp speed experience would cost you only 100 rupees. That is less than USD1.
Dum-dum-dum-dum-dum.
I am unlucky enough to stand directly underneath a large speaker playing out upbeat Sri Lanka songs. I feel like I am in a night club somewhere. Zouk Singapore perhaps. Or Zouk Lanka-Ashok-Leyland. My head spins. Where is my paracetamol?
I have been on buses with questionable musical taste in Myanmar, Cambodia, Laos, Indonesia and even in Malaysia, but this one proves the King Effect exists. This, Lanka-Ashok-Leyland from Udawalewa to Wellawaya, is way up there. Way, way up.
And I swear Sri Lankans pronounce these places differently.
The tempo is outrageously fast, adding to the sensation that I am traveling on board the USS Enterprise, with Hikaru Sulu speeding at the steering wheel. Slow down Sulu, you are going to break the diesel-powered warp core!
Dum-dum-dum-dum-dum.
I am stating to adjust my thoughts to the beats. I can get use to this.
Yea.
Dum chapati dum chapati dum hilang lee ay. At least I think that is how the song goes.
I can feel the roti I had this morning being churned upside down in my stomach. This is not good.
They say a Ferrari can accelerate from zero to 80km/h in less than five seconds but that is nothing yo. I bet the Italian engineers cannot do what a Lanka-Ashok-Leyland can: an instantaneous stop.
As the damn bus cruises along Sri Lankan narrow road that can barely fit two buses side-by-side, overtaking left, center and right, the driver hits the brakes frantically.
I am compressed from all sides. The seat handle pokes into my side. The woman’s bag gives my balls a good kick. Julien, unable to control for his inertia, slams into my back.
Air runs out of my stomach bypassing my lungs and out of my throat, joining the rubber-filled atmosphere, contributing to carbon concentration in the air, killing the planet possibly by the end of this cursed century.
Cows are crossing the road. Moo-fucking-moo.
Luckily nobody and no cow is hurt, never mind my stomach.
As I gather myself, a mother seated nearby holds on to her crying baby tighter. The infant was only thrown off her lap when the driver braked. To calm the little one down, she pulls up her shirt, exposing her left nipple to feed the baby.
“Don’t look,” I tell myself.
“I’m alright. I’m progressive enough that I don’t mind a woman breastfeeding her baby in public,” I argue with myself.
“Look away you creep,” that little voice in my head persists.
The bus resumes at its previous pace. The music blares ever louder. The crazy driver’s life goes on.
Mine? I think it flew out of the window.
“Are you alright?” Annie asked.
Dum chapati dum chapati dum hilang lee ay.
I need to Shazam that.
The GDP growth for the second quarter decelerated further to 4.0% YoY from 1Q16’s 4.2% YoY. But the most interesting GDP component ever since the GST was implemented in April 2015 is private consumption.
And there was a huge jump in that part of the equation. The 2Q16 private consumption expanded 6.3% YoY from 5.3% YoY in the previous quarter. It suggests things are normalizing.
Is growth normalizing?
I did a bootstrap model comparing actual growth with what it would have been without GST. It does show some kind of normalization.
The modelling is very naive with just a bit of seasonality sprinkled in it. The blue line is the actual YoY GDP growth while red is the counterfactual if there was no GST imposed:
But it is important to say it is not so straightforward to claim consumption growth is normalizing. The fact is 2Q15-1Q16 growth are incomparable to the 2Q16 rate. The latter period is the first time the GST effect has been controlled on the year-on-year basis since the tax was implemented while the earlier ones are polluted by base effect. Perhaps, it is better to compare 2Q16 rate with those before 2015 to get a feeling how the GST has impacted economic growth as a whole.
But we have only one point so far. Maybe it is wise to be patience and wait for more data point to be available.
Difference-in-difference
Nevertheless, the nature of 2Q16 makes YoY difference-in-difference analysis across time possible for the first time. Diff-in-diff is done to compare how a certain thing (in this case, YoY GDP growth) behave in two different situations with respect to one factor, while controlling for everything else. Controlling for everything else is tough, but in our case, we are interested the impact of the GST on GDP growth only.
More specifically, what we want to know is whether consumption GDP growth is weaker with GST than without, post-2Q15-1Q16 transition period. Or to put it simply, is the GST-drag on consumption GDP growth a one-off thing?
In the spirit of stylized facts, we want to determine whether it is Case 1 (which is bad):
Or Case 2 (which is okay):
Case 1 offers a much bigger output loss than Case 2. There is a Case 3 where output loss happened only during a few periods, but I do not think it is realistic since the GST is an ongoing concern.
YoY chart above suggests we are closer to Case 1.
Quarterly growth suggests case 2
But keeping in mind the issues about base effect for YoY method, maybe quarter-on-quarter calculation would be of a better help.
And QoQ suggests Case 2 is in play. There is a persistent negative effect on growth rates. From the Department of Statistics seasonally adjusted data, 2Q consumption grew only 0.7% QoQ. In 2011-2014, growth that quarter averaged close to 2% QoQ but in 2Q16, it was only 0.6%:
Indeed, QoQ growth rates since 2Q15 has been weak compared to previous years. QoQ in an way does suggest some kind of a growth slowdown.
How much output loss we suffered?
The easier question is whether the GST has adversely affected the GDP levels. It is easier because base effect is pretty much irrelevant to levels. The answer is, it has.
In the first chart, you can see the GST roughly took 1 to 2 percentage points off quarterly consumption GDP growth. That is equivalent to MYR47 billion output loss in real terms (2010 prices) in the 1Q15-2Q16 period. This includes the abnormal spending increase in 1Q15.
MYR47 billion sounds large. So is Najib’s billion ringgit donation. But to put the number is the proper context, the total size of real consumption GDP during that period was MYR843 billion. So, that is about 6% output loss in that period.
But I have not done the same diff-in-diff for other GDP components. I would speculate the overall impact is bigger than MYR47 billion. But it is hard to imagine it in my head since the expected impact is all over the place.
But I am certain the overall economy lost some economic output. That is probably Captain Obvious speaking.
Implications
If Case 1 is true, then the government has less room to mess around with its GST revenue and start encouraging investment to raise the GDP potential so that the loss is recovered as soon as possible.