By Chandra Jayaratne –
An Open Letter to the State Minister of Finance & State Minister of National Policies and Economic Affairs, Copied to the President, Prime Minister & Finance Minister
Dear Younger, Professional and People’s/Nation’s Prosperity Committed State Ministers,
“A Wake Up Call”: Urgent Need for Change Management Leadership Initiatives to Rebalance Growth Priorities & Expert/Lobbyist Advice with Political Realities & Expectations of the Marginalized
This appeal is to review this submission, reflecting back on the guiding principles and value commitments that compelled you to enter politics and seek a mandate to be People’s Representatives, instead of continuing with your respective high reward option careers in the private sector.
In the above context, please reflect on the following recent statements of acknowledged experts, which you have surely made note of already:
1. “Sri Lanka has to keep on a path of reducing budget deficits, broaden revenues, keep the exchange rate flexible to conserve forex reserves and move towards inflation targeting. Sri Lanka has high debt and low tax revenues which have made previous episodes of global downturns difficult to navigate. Sri Lanka is vulnerable because of its current account deficit, low US dollar reserves position and high debt rollover requirement ” -Eteri Kvintradze, IMF Resident Representative Sri Lanka.
2. “Prepare for the Unexpected Risks”- “I don’t think we can stop being vigilant. There are good reasons why people are feeling happier, why the global economy is doing better, but I think on the financial side we’re far from saying we’re in the clear. And with the asset prices very heavy, with leverage up, the risks are not small.- December 2017– Raghuram Rajan, the former governor of the Reserve Bank of India.
3. “World Unprepared for Next Financial Crisis” –“One of the consequences of the crisis has been completely underestimated, in my opinion: the populism that is appearing everywhere is the direct outcome of the crisis and of the way that it was handled after 2011/2012, by favouring solutions that were going to increase inequalities. Quantitative easing (by which central banks inject liquidity into the banking system) was useful and welcome. But it is a policy that is basically designed to bail out the financial system, and therefore serves the richest people on the planet. When there’s a fire, firemen intervene and there is water everywhere. But then you need to mop up, which we didn’t do. And because this water flowed into the pockets of some, and not of everyone, there was a surge in inequality.”- Dominique Strauss-Kahn, a former chief of the International Monetary Fund
4. “Debt vulnerabilities of the country need to be managed with extreme care, including re-examining military spending given the “social changes the country has undergone” since the war ended nine years ago”. “There are at least three complementary options that deserve to be considered. First, boosting domestic demand through various channels, including progressive tax reforms, expanding social benefits and increasing minimum wages, among other measures; the resulting improvement in GDP growth would increase fiscal revenues. Second, opening the discussion on whether the military budget reflects the fundamental changes the country has undergone in the last years, in particular in the fields of peace and economic development. And third, renegotiating the debt with creditors in order to expand the fiscal space to boost domestic demand and generate revenues to ensure that nobody is left behind. Fiscal, monetary, economic and social policies need to be fully consistent”
“Warning against any cuts in social spending to repay increasing debt, also raised concerns over Sri Lanka’s strategy to stabilize the economy by strengthening the fiscal and external sectors, as recommended by the IMF, by rationalizing social security benefits.” “Trying to achieve fiscal adjustment by reducing public expenditure in education, health and social transfers actually hinders long-term development and may have negative effects on social and economic stability,” “It is my view that such cuts should at least be compensated through cash transfers targeting those in need and ensuring that they reach the beneficiaries in a timely and efficient manner. Investments in the rural economy should be directed at supporting the livelihoods of these small-scale producers including technology transfers, market access and physical and natural resources, so they will be resilient against these subsidy reductions.”“In my view, while maintaining macroeconomic stability is an important concern, this aim should not prevent human rights assessments of these planned reforms, in line with international human rights standards.” “While commending the Government on its effort to streamline taxes, he called for further measures to be taken to broaden the tax base and curb money laundering. He also advocated that the Government close the legal gap that exists to enlist the help of the banking system to curb tax evasion. In his preliminary report he also raised concerns over increases in VAT noting that “the cost of such tax is borne by the poorest part of the population.” According to the report in 2017 the Government raised 56.5% more revenue from VAT than it did in 2016.”- United Nations Independent Expert on Foreign Debt and Human Rights, Juan Pablo Bohoslavsky,
5. “Government measures to address countrywide indebtedness were insufficient. The Government should establish a proper legal framework to regulate microfinance institutions to cap interest rates and prevent abusive collection practices. The moratorium would prevent vulnerable groups, particularly women, from exploitation and abuse by lenders”. UN Independent Expert on Foreign Debt and Human Rights, Juan Pablo Bohoslavsky
Please next reflect on the under noted, few heart-wrenching stories from the Gammadda door-to-door campaign:
1. SRI LANKANS LIVING IN TREES HAMBANTHOTA DISTRICT – WALSAPUNAGALA
The Walsapunagala village is one of the border villages that constantly face the threat from Wild Elephants. In addition, they also face a drinking water problem. Parents claim they fear sending their children to school because of the elephants that come into the village by night destroy property rendering them helpless. Since this village is not protected by an electric fence, wild elephants encroach the village, which has forced villagers to seek refuge in small, unsafe shacks which have been built on tree tops.
THE MAIN ISSUE HERE SEEMS TO BE ILLEGAL CULTIVATIONS IN PROTECTED FORESTS BY BUSINESSMEN BASED IN COLOMBO, THAT DISPLACES ELEPHANTS FROM THERE NATURAL HABITAT.
(RESIDENTS REQUEST AN ELECTRIC FENCE IN ORDER FOR THEM TO LIVE WITHOUT THE FEAR OF WILD ELEPHANT ATTACKS)
2. BATTICALOA DISTRICT – PERIYAPULLAMALAI
There are around 600 students receiving education at the Periyapullamalai Mixed Roman Catholic School in the Chenkalady Divisional Secretariat. There are 9 teachers in this school. These classrooms do not have the adequate amount of desks and chairs for the children. The school does not have a wall or a fence.
(THE PRIME REQUEST OF AREA RESIDENTS IS A SAFE ENVIORENMENT FOR THEIR CHILDREN TO BE EDUCATED IN AS WELL AS A PROPER PREMISES TO STUDY IN.)
3. BATTICALOA DISTRICT – JAMIYULLA
Garbage is moved close to the Jamiyulla Sirin School located near the Kaththankudi Lagoon as a result of people disposing it into the lagoon. As a result the children are forced to educate themselves in a contaminated environment
(RESIDENTS REQUEST AUTHORITIES TO CLEAN UP THE GARBAGE SURROUNDING THE SCHOOL)
4. KILINOCHI DISTRICT – NACHCHIKUDA
Even after they walk for miles and find water, that water is not pure and is not suitable for human consumption. This village in Kilinochchi, the Nachchikuda village, is a perfect example to depict how people suffer as a result of the unavailability of clean drinking water. The area is currently facing a drought condition. The villagers say that they are sometimes unable to bear the heat and that they lose consciousness as a result.
(RESIDENTS REQUEST CLEAN DRINKING WATER)
5. POLONNARUWA DISTRICT – BISOBANDARAGAMA
People living in the Biso-bandaragama village have long suffered from the Kidney diseases. The reason behind their suffering is the lack of clean drinking water. According to the villagers the situation in the village is so bad that it is almost impossible to find a household without a single kidney patient. A large number of deaths caused by kidney disease were reported recently from the area. The increase in the number of Kidney patients can be clearly gauged by the fact that even before the white flags raised for one funeral are lowered, the flags for the next victim of the disease are being put up.
(RESIDENTS REQUEST CLEAN DRINKING WATER WHICH WOULD IN TURN REDUCE KIDNEY DISEASES)
06. MATALE DISTRICT – RANWEDIYAGAMA
These images depict the hardships people have to undergo when they do not have a proper road to travel on. The people of this village claim a bridge which was built had become unusable around 5 years ago. Residents also claim that this bridge was the only access route to the village of Kosthota and since it had been destroyed, two lives had already been lost after they were washed away by strong currents.
(RESIDENTS REQUEST A BRIDGE IN ORDER FOR THEM TO CROSS SAFELY INTO THE MAINLAND)
07. TRINCOMALEE DISTRICT – KINNIYA GENGEA
Residents of the Gengea Village who frequently face Elephant attacks are made to live in fear. One house that is located in the village is home to a elderly lady who is paralyzed and is also a mother.
(RESIDENTS REQUEST A FERRY TO TRAVEL TO AND FROM THEIR VILLAGE)
These are just a few, out of hundreds of such stories narrated by villagers during the Gammadda door-to-door campaign, depicting the crying out expectations and the plight of the unseen, ignored voters you vouched to represent, dear State Ministers.
The problems highlighted by the villagers of the marginalized segments of our society, appear to be simple to resolve, as it requires only a minute fraction of the resources currently committed and allocated through the national budget, which are in fact controlled and directed under your oversight.
Yet the tasks at hand appear too complex at the same time and may be even too small and of limited consequences in the eyes and minds of those in political governance leadership positions. The priorities, focus and commitments of these political heavy weights appear regrettably to favour personally and politically rewarding large scale infrastructure projects, mega polis and city/financial development projects and business sector promoted growth projects. This misaligned focus is evident when looking at the support and attention generated in the top echelons of political governance in supporting the ‘Fast Track to a Turn Around’ Economic Summit, Global and Asean Economic Forums, the World Cities Summit, International Maritime Conference and Most Admired Leaders and Companies Awards Ceremonies, where leaders are themselves adorned with accolades and admiration awards.
It is apparent that he present political system sustains party politics and not development politics. This has resulted in decades of neglect of the marginalized village societies. What makes it complex is the nature of Sri Lanka itself. We are a nation of thousands of village-nations. One must have the experience and prudence to understand this before attempting to grapple with poverty and inequality. Sadly, not even our senior most politicians appear to truly understand this.
In this context, it is appalling to read the high level lobbying by private sector leaders against the increased rates of corporate taxation. Business leaders point out that ‘when the private sector is the engine of growth, the state should not take money from the private sector and give it to the inefficient public sector (presume the objections even covers transfers via the public sector to the marginalized segments of society). They protest that some industries have suffered vastly from the government’s decision to increase the corporate taxes to 28 percent.
The private sector in advocating for corporate tax reductions must appreciate that:
1. These taxes are paid on profits not incomes (ie. profits after all relevant costs of business, including indirect taxes, administration and marketing) whilst all other consumers pay indirect taxes based on consumption costs.
2. The tax revenues of the state are highly skewed in favour of indirect taxes that apply to all consumers
3. Businesses are legitimately entitled to tax concessions and exemptions, some of which are openly abused. Businesses can even willfully engage in tax avoidance and even evade tax by illegal actions which reduce taxable profits (eg. via customs/excise offences, classification of incomes as generated via tax free sources, transfer pricing, and money laundering
In the above context, it was more appalling to note that the lobbyists appear to have succeeded since the Prime Minister echoes recently that the government is in discussion with the private sector to amend some taxes recently imposed, identified as hindering the growth of the private sector.
I turn to you both, as younger Professional and People’s/Nation’s Prosperity Committed State Ministers, and appeal that, with the active support of the Minister of Finance, (himself an astute and seasoned politician who clearly understands the ground swell political opinions), to be the Change Management Leaders, to Rebalance Growth Priorities, Expert/Lobbyist Advice with Political Realities and Expectations of the Marginalized Segments of Our Society and thereby deliver some relief and redress the urgent needs of the marginalized villages identified by Gam Medda.
The change management leadership option entrusted to your broad shoulders is to set up a system to regularly place before the Parliamentary Public Finance Committee, all spends in the succeeding four week period each month, above Rs 10 million per activity ( excluding essential spends on health, education, public services; and subsidies and transfers for public sector salaries and loan interests etc), whether budgeted, planned as supplementary votes or planned under any contingency spend lines or as a budget item substitution, by all ministries and public institutions, along with an oversight review recommendations by you both, following engaging in a Value for Money Review by which you mark out all items of spends identified as not essential, wasteful, and those which can be deferred on account of it being of lesser priority in the interest of alternative re-allocation for essential rural village development purposes to redress urgent and priority needs of marginalized communities. For example, options for deferred or non essential based planned spends could include:
- Costs of ceremonies and tamashas, lavish spends and extravaganza opening ceremonies etc
- Costs of providing ego centric and excessive security for VIP’s
- Vehicles and Office Upgrades for politicians and high officials
- Foreign tours and travel costs of politicians, high officials and invitees
- Military spends
- Spends identified previously as wasteful by Audits, Reviews, etc
- Deferment of Capital Budgets with low priority
- Cost cutting and waste eliminating productivity options
- Energy saving and unnecessary travel costs
It is almost certain each month at least Rupees One to Ten billion or more can be found as falling in to the above categories of non essential spends. Many competent professionals I am sure will most willingly support your initiative on a pro bono basis. An all party endorsement by the Public Finance Committee will assure the public interests and essential spends and priorities are assured. The priority spends of the reallocated funds can also be agreed to on a bi-partisan basis
Your initiative upon unbiased execution with professionalism and commitment, will be hailed by all in society and endear you both, the government and the ruling coalition parties as truly representatives of the people across the country. All in Civil Society too will endorse and encourage you in successfully realizing the mission and goals set.