Colombo Telegraph

Mahinda Chinthanaya And Public Accountability For The Economic Crisis In Sri Lanka

By Anonymous –

The ‘miracle of Asia’ is rapidly morphing into the ‘debacle of Asia’ as the Sri Lankan rupee plunges to an all time low with the trade deficit ballooning to unsustainable levels, and the county sinking into a debt trap. The people are paying for the debt incurred due to corruption, loss making enterprises, and the policy mistakes of a jumbo cabinet of incompetent Ministers. Just before the three day Vesak holiday with its excess of commercialized public religion the prices of cement, gas and milk power were raised as famers poured unsold milk into rivers although the Minister of Life Stock had recently imported special Australian cows to boost milk production – at significant cost! Good timing indeed! President Mahinda Rajapaksa that same week intervened to order the National Savings Bank to cancel its highly controversial purchase of 13% stake in The Finance Company at an inflated price. The transaction was described by many stock market analysts at the time as yet another ‘fixed’ deal where a state entity buys shares of a company at highly a inflated price in what is termed as ‘push and dump’ practice. National Banks have been willy nilly issuing bonds to raise funds at the behest of the Central Bank’s Governor, who has led the country into a debt trap and against whom charges of economic crime and criminal negligence is mounting.

The pendulum has swung from one extreme to another: the best performing stock exchange in 2010 has tanked. Last week the Jakarta Post, Indonesia’s leading English language daily ran a story headlined: “Sri Lanka’s Postwar Economic Miracle Sours”. Lanka’s looming economic crisis which cannot be disguised by the Central Bank boasting about 8 percent GDP growth on borrowed steam, seems to be common knowledge overseas, has been barely discussed within the country due to state-orchestrated patriotism against the U.S resolution calling on the Lankan government to ensure reconciliation and accountability for excesses at war’s end at the United Nations Human Rights Council meeting in Geneva. Meanwhile, the main political opposition in the country has been silent and silenced on the unfolding economic debacle by its own internal crisis.

During the war years, an economic think tank in Colombo did a notable study on the “Economic Costs of War in Sri Lanka” which calculated the lost opportunities for growth as a percentage of the country’s GDP which was indeed significant. At this time, a similar study on the “The economic costs of the failure to effect reconciliation and power-sharing” three years after the war ended in May 2009 may be warranted as the political costs of the Rajapakse regime’s domestic and international policy mounts. There is need for clear accounting of, and accountability for, the economic impacts of the political and governance policy of the Colombo regime on the economy of the country, particularly, its chilling effect on economic growth–not just in terms of the lack of foreign direct investment (FDI) and investor confidence at this time.

As the clock ticked in Geneva at the 20th United Nations Human Rights Commission sessions, the Colombo regime seemed to fast lose support from key trading partners, investors, and tourist revenue generating publics in India, Europe and the United States due to its confrontational policies, empty rhetoric and grandstanding in the absence of on-ground demilitarization, power sharing and reconciliation after the war ended three years ago in Sri Lanka. Last year Tamil Nadu Chief Minister Jayalalith Jeyram called for a boycott of Sri Lankan goods and services and economic sanctions. Meanwhile the SL rupee depreciated to historical lows unknown even in the worst year of the war, as the government printed more money and continues borrowing at commercial rates to pay off the interest on debts incurred for white elephant development projects in Hambantota, loss making state enterprises like Sri Lankan and Mihin Air, the Ceylon Petroleum Corporation, and the regime’s conspicuous consumption.  The dollar sold at a shocking 130 Sri Lankan rupees and lost purchasing power, while questionable inflation rates were released by the Central Bank to disguise the problem. In the context, the New Year promises mounting protests and strikes by working people at the rising cost of living, increased economic inequality and poverty amid stagnant wages for the working classes.

Internationally, the Rajapakse regime’s failure to effect genuine reconciliation at the end of the war, its unwillingness to share power and prosperity (not only with the war-stricken regions), has finally elicited a response, in the form of the US resolution against the Rajapakse regime at the UNHRC.  Significant segments of the International community are also worried that the tipping point of militarization has been reached in the country and that militarization is counterproductive to genuine peace and human security in the postwar context, and hence are concerned about a possible return of violence due to the failure to effect genuine reconciliation and ensure that victims are provided justice and the wounds of war healed. The National Museum which is in a virtual high security zone in Colombo was robbed recently.

Regime-sponsored protests and patriotic rhetoric about ‘sovereignty’ have been orchestrated to mask the deep and unfolding economic crisis on the streets and in homes throughout the country at this time. The current economic crisis in Sri Lanka is directly related to the post-war political crisis in the country precipitated by the ruling family’s desire for unlimited power and self-aggrandizement. The Rajapakse model for Sri Lanka’s post-war economy has been reconstruction managed by the extended family and cronies in order to construct a hegemonic order and a strangle hold over the political economy. This is the opposite of liberal democratic peace desired by Lankan citizens who value civil liberties, the rule of law, and poverty alleviation for an equitable and just society.  At war’s end, the Rajapakse family has run amok militarizing the county while concentrating economic and political power in their hands to ensure regime impunity via the 18th Amendment to the Constitution. The concentration of economic power within the extended Rajapakse family and associated cronies has been considerable, though less remarked than the concentration of political power.

The rhetoric of “sovereignty” and post-colonial victimhood employed by the Colombo regime to rebut the United States Resolution supported by the UK and EU at the UNHRC in Geneva rings hollow in light of the internal colonization, militarization, occupation and land grabbing by the Rajapakse regime in the northeast minority regions of the country after war ended. In this context, a study of the economic costs of the failure to effect political reconciliation at war’s end would also then provide insight into the policy debacle, cronyism and institutional decay that has led to the current economic crisis.

However, given the ‘politics of knowledge’ production in a country where investment in research, development and in critical thinking, in both the public and private sectors are minimal and knowledge and information is increasingly blocked by a paranoid regime bent on silencing its critics, a study of missed opportunities for economic growth at war’s end may be too much to ask.  More or less objective political economic analysis is a dangerous business these days. Those who engage in critical reasoning and analysis and actually read economic fundamentals rather than listen to the spin put out by the Governor of the Central Bank, in order to assess the regime’s post-war economic development policies are accused of ‘talking down’ the economy and being anti-national or having a political agenda.

The failure to attract foreign investment and the indebting of Sri Lanka to China which has bank-rolled the majority of Rajapakse’s capital intensive white elephant infrastructure projects in Hambantota since the end of the war is directly related to the lack of a balanced strategy and policy that prioritizes “trade not aid” for post-war Lanka’s political and economic development. After all, the United States is Lanka’s largest trade partner and the European Union it’s second largest.  Since aid has long been considered a form of ‘colonialism by other means’ whether given by Europe, the US, China or India, the left has always emphasized “trade not aid” as a means of and for real economic growth.


Trade, Aid and Mahinda Chinthanaya as Policy Debacle

What county names its economic policy framework document after the President of the country? The former head of state of Iceland has been charged for Economic negligence given the country’s default and enforced debt restructuring by the International Monetary Fund (IMF) – in the interest of public accountability. Geir Haarde, Iceland’s former Premier, is charged with negligence in failing to prevent that country’s financial crisis and faces up to two years in prison if found guilty. The trial in Reykjavik is thought to be the first of its kind where a world leader is held accountable for presiding over a country’s economic collapse. Mr Haarde, who was prime minister from 2006 to 2009, pleaded not guilty in his court appearance on Monday March 5 2012. Iceland’s parliament voted for the trial to take place in 2010, arguing that public accountability is an essential requirement of the country’s recovery process.

Harvard educated, African Economist Dambisa Moyo, in a book titled “Dead Aid” has called for an end to aid to Africa and argues that un-transparent and poorly monitored aid, traps counties in a debt trap, promotes poor and corrupt governance and de-develops institutions in aid receiving countries. At war’s end in Sri Lanka, TRADE NOT AID which has pushed many countries in Africa into a debt trap is the way forward. The Chinese loans taken for Rajapakse’s white elephant infrastructure projects are indebting the country and significant reason for the current deficit and depreciating rupee, with its knock on effects on reduced purchasing power and raising the cost of living. The depreciating rupee and the reduction in purchasing power have affected poor people disproportionately. It is the poor that are being forced to pay for Rajapakse’s egoistic economic policy debacle in Sri Lanka at this time. While the US is Sri Lanka’s biggest trade partner and trade grows the productive sectors of a country, so-called Chinese “aid” to Rajapakse is actually impoverishing Lanka and facilitating poor governance.

It is time to seek accountability from the head of state, his brothers and their cronies at the Central Bank for the unfolding financial crisis and depreciation of the rupee Sri Lanka. The current jumbo cabinet of Ministers under Mahinda Rajapakse, is arguably the most under-educated, ignorant, and technically and technologically incompetent cabinet in the history of post-independence Ceylon/ Sri Lanka. This is in the context of the fact that in today’s globalized information economy and trans-nationally networked society, technical competence of high caliber is necessary for policy making, planning and development project implementation, monitoring and evaluation, especially if Lanka is to be a “knowledge hub”. The majority of the Ministers of the Rajapakse Cabinet are mono-lingual and locked into the prison house of linguistic nationalism and jingoism. They mask their technical incompetence, inefficiency and policy mistakes with nationalist rhetoric. Subject Ministers do not have the qualifications, expertise or experience for the port folios they hold and are also reluctant to bring in or consult experts being fearful that their ignorance would be shown up.

The largest minority community in Sri Lanka, well known for high academic excellence and for exporting professional skill and talent overseas, is represented today in the Cabinet by war lords and individuals directly accused of war crimes with little education such as Douglas Devananda and Karuna Amman – a far cry from Oxford educated Lakshman Kardirigamar. This is in itself an insult to the Tamil community which has always had a surfeit of highly qualified and educated expertise in most fields and used to export technical expertise to places such as Malaysia and Singapore where the current Deputy Prime Minister and former Finance Minister is of Ceylon Tamil descent.

The most important portfolio when it comes to economy and development policy is held by a person without the necessary qualifications, experience or expertise and merely because he is related to the President: Basil Rajapakse the so-called Minister for Economic Development.  The Higher Education portfolio is held by S.B Dissanayake who clearly lacks any of the characteristics of an intellectual or knowledge of the research process to enable Lanka to become a “knowledge hub”. Meanwhile, the Minister of Education, Bandula Gunawardena, said recently that a family of three could live a comfortable life with an income of Rs.7500 per month if they used their money wisely. Addressing a gathering at the opening ceremony of the Maternity and Childcare Centre in Homagama he claimed that if people refrained from wasteful expenditure they could live happier, fuller and pleasanter lives. The so-called Minister of Education should be asked to resign for lying and/or incompetence at this time since he has claimed that a person may live on Rs 2.500 a month, which is factually incorrect. He is clearly unfit to hold such an important portfolio and provide a poor example and role model for students in the Lankan education system at this time.  Previously the incompetence of this Minister was evident following the GCE A Level grades scandal which he seems to have forgotten!

Double standards and double speak on the economic and political front seem to be the name of the game played by the Colombo regime. While the poor are asked to do import substitution, and the so-called Minister for Economic Development talks about “self-sufficiency” (swayamposhithwaya) in high Sinhala, the ruling family has different tastes and consumption patterns – super luxury imported cars for Colombo and Kandy night races on which diminishing foreign currency reserves are being spent! Clearly, the royal family and UPFA Ministers would be advised to set an example in simple living and take a pay cut and practice what they preach! President Rajapakse has said that he is concerned about involvement of local government politicians in crimes, but ignores the crimes and lies of national level politicians and cabinet members. The example of nepotism, cronyism, downright lies and poor local government is set at the top and seems to have a trickle-down effect to provincial government.

The UNP Debacle

The UNP opposition also bears responsibility for the twin political and economic crises that Lanka faces at this time. Why were the opposition parties, particularly the UNP, as well as, the business community been largely silent on the current unfolding economic debacle? Although the UNP has often styled itself as the party that knows to run the economy, the infighting seems to have led the leader to attempt to silence party members on all fronts, thus heightening Lanka’s democratic deficit at this time. After all, public debate, analysis and informed discussion of policies in order to educate and inform the public and foster public debate are necessary for a vibrant democracy.

The UNP under Ranil Wickramasinghe suffers a democracy deficit parallel to the democratic deficit in the county at large under the militarized Rajapakse regime. Beset by infighting the UNP has failed in its fundamental duty as a responsible opposition to carry out a systematic campaign to educate the people on the reasons for the twin economic and political crises that Sri Lanka faces at this time. As dissent within the party mounts, Wickramasinghe lacks the moral authority to critique the Rajapakse regime on its greed for power and poor democratic governance record since the UNP has no democracy within, and hence has remained silent rather than discussing the real issues with the people. He has also failed to groom a leader from the younger generation for the Grand Old Party who would best represent the inclusive, plural and multicultural values of the party which Sajith Premadasa simply does not seem capable of understanding, let alone representing. At this time it seems that Rosy Senanayake would be a better man to lead the UNP, and women in Lanka would best unite to make her a winner!

Unfortunately the UNP Mayor who should be raising the issue about the anti-people development policies of the militarized UDA of Colombo; policies, whereby poor people living in slums in low lying areas on the edges of the city are evicted has been silent. The current Mayor increasingly appears to be Wickramainghe’s puppet, elected by default, mainly by the Tamil-speaking majority residents of Colombo. What a disappointment for Colombo’s citizens who voted for the UNP at the Colombo Municipal Council elections last year. The ever opportunistic Ranil Wickramasinghe, like Nero appears to be fiddling while Rome burns, playing patriotism and while silencing his party members from debating the crisis. There seems to be little difference between the leader of the UNP and the SLFP in their greed for power which is compounding the current political economic crisis.

While the ruling coalition UPFA had its discussion and training on the political economic crisis in the country recently at the military camp in Diyatalawa, the UNP has made no attempt at systematic or systemic analysis of the current political economic crisis in Lanka, nor has it sought to educate the public on the issues. Yet, an informed and knowledgeable public is the fundamental requirement of democracy and the UNP as the main opposition party has an obligation to keep the people informed and educated on the twin crises facing Lanka at this time.

In the final analysis, it is apparent that the U.S resolution in Geneva is not against the people of Sri Lanka, it is merely against the Rajapakse regime’s failed policies post-war, and in the long run, in the best interests of democracy and development in Sri Lanka – whatever the US Human rights track record may be in other parts of the world. The UNP opposition under Ranil Wickramasinghe has failed to perform its role of educating and informing the people of Sri Lanka on the complexities of the real situation and the political economy of the crisis that the country faces today.

Economic Crisis and Public Accountability

In order to correct the economic debacle unfolding at this time in Sri Lanka and to ensure a modicum of financial, economic and development policy accountability the following measures are recommended

  1. All the Hambantota capital intensive mega-infrastructure projects be put on hold, reviewed and evaluated for their feasibility, and human development and poverty impacts in the context of the current financial crisis and debt trap. Projects that do not contribute directly to poverty alleviation and human resource development be discontinued. The port, airport, and various spots stadia in Hambantota appear to be white elephant projects since they cannot be sustained by the population of the district (350,000) of which over ninety percent are farmers and fisher folk, who lack the labour profile, and service sector and industrial skills to work in international airports, convention centers and proposed industrial park. The demographic and labour profile of Hambantota simply cannot sustain the China – funded international air port and planned industrial park. No adequate social impact assessments or feasibility studies of the Hambantota development plan and its benefits to the people appear to have been done prior to commencement of construction. The Hambantota harbor inaugurated over a year ago has had 5 ships visit because of the rock beds that lie under the ocean from Hambantota to the Great and little Basses, famous among deep sea divers for ship-wrecks. The rock beds explain why unlike Galle, Colombo, Mantai, Trincomalee, Hambantota was never a port in ancient Lanka. It should be remembered that Burma became a military dictatorship with lots of “aid” from China who aid giving has historically buttressed dictatorships and poor governance in Asia and Africa.
  2. Likewise, a full public accounting of and for foreign exchange spent by the Rajapakse regime on conspicuous consumption and gala events, particularly, imported super luxury cars for politicians and Namal Rajapakse’ s car races in Colombo, Kandy etc. need to be assessed and these activities curtailed. Many roads have been carpeted at unwarranted cost for Namal Rajapakse’s car racing activities (such as the road with so many bends), rather than for development since there are many other roads that are in need of repair. The post-war Rajapakse regime has spent huge amount of foreign currency on luxury cars and car races, rather than investment in public transport for long suffering commuters. A white paper on public transport upgrading and development which is less environmentally costly than cars is necessary and the Singaporean transport model should be followed. The Chinese Government recently made it necessary that its politicians to buy Chinese manufactured cars which are cheaper. In Lanka politicians should be required buy cheaper Asian manufactured cars rather than Audis, BMWs and Mercs to save dwindling foreign reserves. An accounting of all the funds spent on gala events, Bolly wood nights beach games, car races needs to be made available to the public. In Kandy last week there were complaints from the public that the military was organizing car races in which Namal Rajapakse was racing, and that people were being coerced to purchase tickets for the event. Meanwhile sand bagged roads in Kandy city center for the Rajapakse car races were an eye sore and greatly inconvenienced the public – a fact pointed out by the Mahanayake who spoken out against the event. The Kandy night races were after protests in Colombo last year against drag races and noise pollution — all for the entertainment of the Rajapakse heir apparent.
  3. There should be a total restructuring of sector spending to reflect post-war priorities. State sponsored military business and the defense budget need to be down sized and right sized for a post-war context and funds should instead be allocated to Health, education, research and development which has a miniscule budget compared to the defense ministry. The IMF should not release the next tranche of funds till this is done. Military businesses thrive thanks to invisible state subsidies in the form of free land, the use of military assets, and loans to bail them out when they run into trouble. Military business also gives rise to corruption and is not economically rational, especially in the context of already high public debt. In Indonesia today as the military is being reformed and State subsidies withdrawn under President Susilo Bambang Yudhoyono, military businesses have folded.
  4. Investigation of the Common Wealth Games debacle and public funds wasted, including on public relations companies to generate economic spin, should be conducted to ensure public accountability of the Central Bank and its Governor Nivard Cabraal at this time. The dichotomy made between ‘inefficiency’ and ‘corruption’ is a false one that serves to water down financial and economic crime committed by un-qualified, politically appointed stooges. There should be an investigation of the role of the Central Bank Governor in the Commonwealth Games bid which would have bankrupted Lanka if it had been won. There needs to be an investigation of the manner in which Central Bank manipulates figures and indexes and economic information and the Governor held accountable for economic crimes and negligence.
  5. At the same time, international donors need to be asked to stop funding un-necessary capital intensive infra structure projects with dubious benefit to poor communities and the people of Sri Lanka, until proper social and poverty impact assessments of these projects are done. Many capital intensive infrastructure projects provide substantial kick-backs and the collusion between corrupt local politicians and the aid industry is apparent and are also contributing to the country’s debt trap in the name of infrastructure for economic development which is merely white elephant projects.  Donors should be asked to stop funding GoSL mega “development” capital intensive infrastructure projects and rather invest in human resource development except urgent humanitarian programs given the massive debt being accumulated for fake development projects which enable large kickbacks for the ministers and their cronies.  All infrastructure projects should be evaluated in terms of their poverty impacts. Meanwhile there needs to be a systematic civil society audit and evaluation of all the Chinese and Indian “development” projects and their benefits to the people and delivery time frames in the interest of good AID governance for debt reduction. The international development donors have also contributed to the post-war governance debacle by being silent on and going along with the militarization of urban development and the Colombo development model which is anti-people and environment. World Bank that likes to talk about “good governance” is planning to provide a massive loan to the Ministry of Defense supposedly for Colombo’s urban development and will add to the already highly inflated defense budget of Lanka. Civil society must protest against such project that support militarized local governance and militarization in Sri Lanka since aid is FUNGIBLE. World Bank needs to be asked to stop funding the Ministry of Defense and the militarization of Lanka via the Urban Development Authority!  The IMF must place reduction of the military budget and demilitarization as a precondition for release of the remaining tranche of fund to the GoSL.
  6. Finally, it is to be hoped that the passage of the resolution in Geneva will be a wake-up call for Sri Lanka’s politicians in all political parties towards cleaning up the country’s abysmal political culture and a policy paradigm shift. The concentration of power in the hands of unqualified politicians, political families, politicization of public institutions, nepotism and cronyism, and the appointment of unqualified relatives and stooges to key Ministries and institutions, and the marginalization of qualified and technically competent people, is at the root of the institutional decay, lack of transparency and coherence in policy and planning visible in every sector in post-war Lanka at the root of the current economic crisis. Those who hold cabinet portfolios should be required to have significant qualifications and expertise in the sector and be able to develop sector development plans for each ministry. When those who do not know the subject are in charge they fear those who actually have the expertise and hence the policy mistakes and corruption mount. This situation must be reversed and those responsible for the economic crisis must be investigated and held accountable. Impunity for economic crimes must be challenged since it is the poor who suffer the consequences disproportionately.
  7. Finally, the opposition UNP (and other political parties) and civil society must seek accountability for the economic crisis and develop a strategy and campaign to discuss and educate the citizens of Sri Lanka on the gravity and causes of the current situation and the need for a policy paradigm shift so that all Sri Lankans, not just the ruling family and associates may benefit from the end of war in the country three years ago. The UNP must also seek genuine solutions rather than pretend that its work is done and it is merely for the Rajapakse regime to implement the LRRC recommendations. An informed and educated public and citizenry is after all a sine qua non for a vibrant democracy.
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