Governance is the management of a nation’s affairs through the exercise of political power, vested in a group of people with divergent views, uniting for a common purpose (Hupe and Hill, 2007). These political powers form socio-political entities and manifest as Monarchies, Dictatorships and Democracies. Governance is the business of administering these socio-political entities in whatever manifestation they exist in a society. This paper focusses on the governance of an independent democratic state with a struggling economy, and the pressures on governance from the stake holders. Accordingly, the paper discusses the state of the economy, the interests and influence of the various stake holders, and the pros and cons of some government decisions.
The state of the economy
The current state of the economy can be described as a victim of the negative influences from the socio-political environment that prevailed in the country since independence. The country which received independence from its colonial masters on a platter, with a strong surplus economy, a highly respected and effective public service, a population with high literacy, and a willing workforce, is today in debt to the tune of thirteen trillion rupees. The state income is incapable of servicing the interest on loans, leave alone re-payment, and the country is forced to carry on by continuing to borrow, with no signs of a recovery in sight. Every government since independence is responsible for the current state of the country’s economy. Also, the impact of the downgrading of the country by rating agencies, borrowing becomes more difficult and cheaper rates even dearer.
Successive amendments have introduced hegemonic elements to the country’s Constitution that have reduced the independence of the public service and created by and large a set of servile officials, fulfilling the bidding of the politicians, which they do for their own survival. The tottering economy has led to the reduction of good employment opportunities for the more gifted among the citizenry, leading to a brain drain resulting in a general decline in the quality of the available workforce. A way out of this crisis is to encourage local production of essential agricultural produce rather than import them, and inviting foreign investment.
To invite Foreign Direct Investment (FDI) the country needs to create a conducive socio-political environment. Enactment of corrosive regulations implying autocracy in governance, regular swings in ruling ideology, politicisation as the main attribute of governance, a polarised population with regular strife between communal and religious groups, hostile labour regulations allowing for frequent work stoppages and holding employers to ransom, a lethargic labour force and a progressively deteriorating work ethic among the labour force, which are currently the hallmarks of the Sri Lankan socio-political environment, nevertheless stand in the way. Other obstacles to FDI are the high cost of electricity, congested roads which makes commuting time consuming, and the regular changes to regulations and tax laws, driven by political expediency.
These environmental issues not only deter FDI, but discourage even local entrepreneurs from investing in ventures, because of the uncertainty they create. Also, the graft culture that has taken hold of the country makes venturing out into business a nightmare. One does not know when the graft network would strangle a project and how much it would cost in terms of time and money to escape. Therefore, incentivising the local entrepreneur in such an environment is difficult, and requires expeditious and concerted action on the part of government if it is to encourage a more conducive climate for the investor, both local and foreign, which is indispensable if the economy is to be revived.
Interests of the various social groups
Governance is also influenced by the interests of several social groups. These social groups are made up of the elite who have wormed their way into the confidence of the rulers through various ruses; the private media moguls who have taken over the role of the nation’s opinion and culture maker; the clergy who have taken on the role of king-maker; the lower end political activist; the drug mafia; and student and trade union activists who keep spewing out violence, regularly obstructing public life and creating a social environment extremely unfavourable to rational economic activity.
The elite who have worked their way into the confidence of the rulers seem to receive absolute patronage. With such patronage they are able to call the shots in any and every activity they choose to dabble in, and make disproportionate gains for themselves in the process. Some of the activities they have been allowed to manipulate are those that affect the poorer sections of the society, and these elite groups seem to indulge in them with no qualms about the hardships they cause to the poor. The air ticket to the expatriate labour to return from the middle east, priced at several times the standard air fare, the expensive quarantine process, well beyond their means, are just two examples. Repatriating the expatriate labour and quarantining them in an inexpensive manner, is an obligation of the state, and subsidising the cost would have been the more correct approach. After all it is this expatriate group that has been subsidising the government with their remittances over the last several years. Instead what has been done is to hand over these activities to their patrons to spin money.
The private media moguls who have taken on the role of the nation’s opinion and culture maker, keep distorting the minds of the public with cheap wit and low class entertainment. Their news channels force their opinions on the masses, and progressively the masses have let themselves be influenced by what they hear and see. Their channels are full of cheap Indian films telecast all hours of the day, exposing the people to low morals, gaudy costumes and loud music. Musical shows are telecast late into the night forcing the viewers to keep up late, distracting students from educational activities and adults from adequate rest.
The state television has shown its incapacity to be a credible alternative that would enrich the minds of the masses with quality entertainment to offset the effect of these gaudy exposures. I am not sure if the Public Performance Board still exists, but even if it does, it appears to be incapable of exercising discretion on the quality of entertainment foisted on the masses.
The clergy who have taken on the role of king-maker is another detrimental influence on governance. While clergy providing sane counsel to the rulers and even rulers seeking clerical wisdom in times of crisis is a positive practice, their overt involvement in electioneering, governance and the day to day activities of the state, is less desirable. The result is that they then steer the thinking of the government from a rational socio-economic focus to one based on traditionally institutionalised values. The involvement of the clergy during electioneering also leads to the clergy dabbling in politics, a detraction from the noble teachings of the Buddha, they have vowed to uphold. Such involvements also lead to a patronage based relationship developing between the two groups, leading to compromising of the rational process that governance is supposed to follow, and places of religious worship being used for political purposes, as was clearly evident in the recent past. Besides, the impact of patronage can mar the ability of the clergy to accurately read the motives and capabilities of prospective political leaders at election time, and use their influence to mislead the masses.
The lower end political actors, facilitated by the 13th amendment to the constitution and the consequent Provincial Councils, are also another detrimental force to good governance, as they comprise mainly the drug mafia and the hoodlums in the society. Political parties patronise them because of the vote power they wield, resulting in the advent of a political culture based on violence and hoodlumism, which they use for their entry to the high portal of governance. This has reflected in the behaviour regularly showcased by the parliamentarians in the august assembly.
Student and trade union activists also fail to understand their role, and have adopted the role of makers and breakers of governments. A few frustrated politically minded individuals have taken over these unions and are in the business of perpetually resorting to violence and disruption, effectively establishing themselves as a permanent public nuisance. Students are the biggest casualties of this process as it hinders the completion of their studies within the time limits of their enrolment as students. They are also under stress by being manipulated by the student union leaders, which is detrimental to a healthy pursuance of academic activity. Naturally, this contributes to the production of mediocre graduates even in the higher institutions of learning considered our best.
Pros and cons of some government decisions
Realising the possible contribution of self-sufficiency in basic food as a means to economic recovery, the government has taken some positive steps. Key among them is the creation of an agriculture corps within the Sri Lanka Army. One school of thought may be that it is another step in the militarisation process the government is following. However, the positive side is that the military is disciplined and whatever they undertake or they are entrusted with, they do it to their best. Therefore, if the government reinforces this decision by providing the military with the necessary infrastructure and the correct policy regimes, and leaves it to the military to deliver on the task entrusted to them, the country will certainly benefit, especially through its positive impact on the tottering economy. We have excellent precedent for this in the “Grow More Food” campaign launched during and immediately after the World War II, when the then government, led by Prime Minister D. S. Senanayake, established an “Agricultural Corps”. Its membership was not enlisted men but civilians, but the model and vocabulary of the military was freely used, and its organizational model was the army.
However, having the best interest of the country at heart, I would like to add a word of caution. Most agriculture crops have failed to succeed in the country in the past because of a quirk of misfortune foisted on the farmer almost annually. Every year when his crop is harvested, imports flood the market, resulting in him not being able to sell his produce and recover the cost of production, leave alone making a profit. Many are the cases of the farmer having to bury his produce for not being able to get a price for it. This is the reason that Sri Lanka still imports large onions and potatoes, when the local farmer is quite capable of producing all the country needs. If self-sufficiency in basic food as a means to economic recovery is to succeed, the practice of importing agricultural produce to coincide with the harvests of their local equivalents must be stopped, as they not only cause large losses to the investments of the farmers, but they also de-motivate them and destroy their morale. I know the pressures that prevail on the powers that be, but for the sake of the country, let us hope that this practice of flooding the markets with imports at times of the harvest of local crops, is discontinued.
Another area that contributes to farmer discontent is the absence of a post-harvest collection, storage and distribution scheme in the country, There are numerous instances when farmers destroy their produce because they are unable to get a decent price for it. If the government is serious about domestic agriculture playing a strong role in the resuscitation of the economy of the country, a well-structured scheme for post-harvest produce management is key. This will also reduce the wastage through perishability during transportation from farm to trade outlet. The spin-off from implementation of such a scheme will be the farmer receiving a fair price for his produce and a reduction in the cost of living of the consumers.
One last word of caution before closing this paper. The government has made a serious decision to provide capital to the business community at a very low cost, expecting a rapid growth momentum. While the cost of capital is important, it is not the defining factor in investment decisions. As illustrated in the foregoing paragraphs, a stable socio-political environment, a just society, and a stable government based on the principles of good governance, are greater influences in the building of a robust and self-regenerating economy. Proof of this is that in the past, entrepreneurs invested in business even when the cost of capital was much higher, but the socio-political environment was not as egregious as at present. We need to recall that the country even had much higher levels of FDI when the socio-political environment was more conducive.
In the absence of a stable socio-political environment, only those with political patronage will be incentivised to take advantage of lower cost capital and venture out, because they are able to circumvent the obstacles due to the patronage they enjoy. Therefore, it is questionable whether the cost of capital has been reduced to incentivise the growth momentum in the business sector of the country, or provide for opportunities for the patrons of the politicians to prosper.
Reducing the cost of capital was done through the reduction in the Statutory Reserve Ratio with the Central Bank, releasing funds into the market, forcing the reduction in demand for investor funds. What the government has failed is to realise is the social cost of this decision. While this is the topic for a separate paper, it is relevant to point out that the country has no social security system in place, and thirty-five percent of the country’s population, the senior citizens spending their twilight years, solely depend on the interest of the investment of their Provident funds for their financial security. This is because the majority of them are private sector employees, the private sector being the largest employer in the country. This decision of the government has cost them a big slice off their earnings. These are people who have given their lives for the country, and at their present state of health, have no earning potential, while their expenses are on the increase daily because of their failing health, lower levels of mobility, and the generally increasing cost of living.
So, despite the erudite counsel based on which this decision to provide lower cost capital to drive the investment momentum, it is worthwhile noting the negative impact of a non-conducive socio-political environment discussed above, and the social cost of pushing the senior citizens to poverty.
Reference: Hupe, P. and M. Hill, (2007), Street level bureaucracy and public accountability, Public Administration, Volume 85no. 2, pp, 279 to 299.