13 December, 2017

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To Ruin Or Rule The State: Bi-Partisan Corruption, Development “Aid” & The Bailout Business

By Dilini Kalupahana –

Ranil Wickremesinghe seems ‘resolved to ruin or to rule the State’. Rather than ‘Zero Tolerance for Corruption’ after regime change in 2015, the Good Governance regime is knee-deep in corruption rackets with a network of business cronies that operate a revolving door – from politics to business and vice versa. Instead of investigating off-shore money trails and apprehending the looters of the wealth of the Sri Lankan nation to pay down some of the staggering national debt, a political culture of profligacy, immunity, and immunity for financial crime by politicians and their business networks have been systematically promoted and institutionalized in the name of “Parliamentary Privileges”. Good Governance politicians are routinely bribed with Duty Free car permits in the name of coalition-politics, while corruption investigations into cases of the previous Rajapaksa regime that was defeated due to cronyism and rent-seeking, or those named in Panama Papers leaks who ‘pumped and dumped’ at the Colombo stock market, are stalled or dead in the water.

Since war ended in 2009 Lanka’s Debt burden has risen exponentially and the people have been denied a peace dividend due to bi-partisan Political Corruption (UNP and SLFP), and ironically ‘Foreign Aid’ funded Development projects, which primarily advance the strategic security and business interests of big bi-lateral “aid donors’ – China, India, United States and Japan. The Chinese Hambantota white Elephant infrastructure projects, such as port, airport, stadium and convention center are just the tip of the ice berg of what Development Economists term aid induced “Dutch Disease”, of which more will be said later. The aid induced debt trap has not however, diminished Lankan politicians’ enormous appetite for bi-lateral loans packaged as ‘aid’ and expensive international technical “experts” who often provide dubious economic analysis, diagnostics, and euphemisms to explain debt in the global south; Asia and Africa.

“Policy instability”, a phrase frequently used to explain low foreign investment (FDI) economic growth in Sri Lanka, and the growing debt trap is a euphemism that explains nothing, really. At this time, the root cause of Lanka’s debt crisis, policy instability and failure to attract Foreign Investment (FDI) to generate economic growth despite its strategic location on the busiest Trade route in Asia-rising, is high-level financial Corruption and reputation damage to the financial sector and economy, including lack of transparency and a level playing field for investors, foreign and local. Again the Bond Scam at Central Bank is the tip of the ice berg.

Bi-partisan Corruption

Bi-partisan UNP-SLFP/JO Corruption is at the root of many of the political, economic and social ills in the country at this time, including lack of a peace dividend, widening economic inequality and a growing urban-rural divide; just go to the Galle Face Lux Condo- Shangri-La strip and then a village in the northeast and feel the difference. Decent jobs, a living wage, absence of meritocracy and inclusion are collateral damage of a political culture of bi-partisan corruption networks and money politics.  However, the economic diagnostics and policy documents prepared by various international developments consultants and the Millennium Challenge Corporation (MCC) that is writing economic and trade policy for the Prime Minister’s office, including the Vision 2025 and the Budget 2017 that waxes eloquent about blue-green development fails to mention political corruption and rent seeking – the elephant in the room -as the root cause for lack of FDI and growth in the real economy.

As Sri Lanka wallows in debt caused primarily by bi-partisan corruption and poor financial governance by the two dominant political parties, the UNP and SLFP (including Joint Opposition), UNP thieves appear to be protecting SLFP thieves, while all parties try not to embarrass their respective foreign aid donors. Hence, the National Audit Bill which would help to recover funds skimmed from various development projects and stored in off shore accounts by UNP and SLFP politicians and their crony networks, in order to pay down some of the national debt has not been passed 3 years after the Good Governance regime came to power. Rather taxes on the common people have been increased on the behest of IMF.

White Elephant Infrastructure and Fake Development ‘Aid for Trade’

Former head of the Reserve Bank of India Raghuram G. Rajan and Arvind Subramanian, both respected economists, have argued in a widely read paper that; “one of the most important and intriguing puzzles in economics is, why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies” (2006). They suggested that aid inflows have systematic adverse effects on a country’s competitiveness, as reflected in the lower relative growth rate of labor intensive and exporting industries, as well as a lower growth rate of the manufacturing sector as a whole. They provided evidence suggesting that the channel for these effects is a real exchange rate overvaluation caused by aid inflow.

But one of the more insidious aspects of aid induced Dutch Disease is indexed in increase in aid-related corruption, rent-seeking, and lack of economic development policy ownership by ‘aid’-dependent countries that results in building of white elephant infrastructure such as in Hambantota, and development disasters such as the Uma Oya project, that fail to meet local people’s development needs and priorities in an environmentally sustainable manner. This is primarily due to marginalization of local and national expertise, and lack of transparency, accountability by aid donors to local civil society in the development aid enterprise.

Arguably, Sri Lanka’s development policy has been “islanded” due to over-reliance on international experts, who have consistently overlooked that fact that the Blue Ocean is Sri Lanka’s greatest natural resource and source of wealth. For example, given that Lanka is an island with more relatively unpolluted Ocean than land, fisheries and marine minerals, industry, and services sectors should logically be the largest export and foreign exchange generator. But foreign trawlers mine Lanka’s blue ocean. When the navy was providing maritime security to ships plying the Indian Ocean and making millions, the operation was privatized  by Gotabaya Rajapaksa in collaboration with Tilak Marapona who constituted Avant Garde, which is co-incidentally the name of a global security and surveillance firm. Avant Guard was and is indeed a bigger scam than the Bond scam, as well as,  a huge national security scam. However, investigation into the Avant Guard scam has long been buried is a perfect example of bi-partisan UNP-SLFP corruption –with international collusion and following a US-sponsored “reconciliation and peace” model! Just check Gota’s California connection and where Senadhipatti went on holiday with Wijeyadasa Rajapaksa, then Minister of Justice who buried the Avant Garde investigation.

A scenario of bi-partisan, local-global networks of corruption has emerged along with what may be termed a degree of aid induced Dutch disease that is manifest in over dependence on international consultants and experts, with a concomitant brain drain of honest professionals out of the country who cannot survive the corrupt system that lacks meritocracy and in fundamentally non-inclusive of diversity. In a sense, Travis Sinniah the Ex-Navy Commander who was just one of a handful of minority Tamils in a leadership position, who questioned contracts and purchase of Russian and Indian vessels, who was required to retire at 55 is an example of this sorry state of “aid for trade” induced Dutch Disease in the country.

A more sophisticated Corruption Racket: Economic Diagnostics and the Bail Out Business

Sri Lanka today is in what the Transnational Institute in Amsterdam terms the ““Bailout Business”, a position qualitatively worse than the debt trap, itself because national economic policy making autonomy and economic sovereignty have been ceded to foreign debtors and related accounting firms.  Discussing debt in the EU, the report points to how 4 global accounting companies, KPMG, Deloitt, Arthur Anderson keep themselves in the bailout business, permanently restructuring un-ending debt burdens, Greece being a prime example. Rather than tracking down stolen funds in off-shore bank accounts to pay off national debts,  selling off strategic assets via public-private partnerships (PPPs), a euphemism for ‘asset stripping’ by random hedge funds, without proper valuations, DUE DILIGENCE, Transparency and Accountability,  tends to be the preferred approach to debt servicing by experts and consultants in the ‘bail out business’. Ranil’s corruption network at BOI  follow advice of what John Perkins termed “Economic Hit Men” paid by the shadowy right-wing organizations such as the Millennium Challenge Corporation (MCC), which claims to do poverty reduction but actually works for the Global 1 percent while compound the bailout business and debt trap of victim-countries.

Increasingly, in an era of Fake News, it seems that we are confronted with fake development and fake experts, diagnostics and advice, which combine to promote the neoliberal agenda and legitimate privatization via Public-Private Partnerships (PPP) in the absence of proper valuation of strategic assets such as lands, labour, ports, transport infrastructure, mineral resources, LNG reserves etc, ear-marked for sale to pay off the soring national debt of a country sans, transparency, oversight by honest professionals and civil activists. Thus too is the looting of public and common wealth via global-local crony networks rendered legal and legitimate in a global financial system that is broken and corrupt as Nobel Prize winning economist Mohamed Yunnus has shown in this new book titled “A World of three Zeroes”.

To be sure, Ranil Wickremesinge plays a more sophisticated corruption game than the Rajapaksa brothers albeit with a little help from his international development experts in Washington DC: He captures and debilitates public institutions by appointing networks of cronies and promoting brain drain of talented professionals, while changing policies with “expert advice” and economic diagnostics of economic Hit men who miss-diagnose the problem and hence the solution to advance interests of global capital and donor countries. In such a context, in addition to brain drain of honest and talented professionals, institutional safe-guards, proper valuations , and due diligence practices are guttered. This also happened with the Central Bank bond scam. Meanwhile, today the Auditor General’s department remains stymied by failure to pass the national audit bill, and the National Survey Department was been under-resources and stripped of talent so the work can be sub-contracted to a US Company – Timble Inc.

Ranil Wickremesinghe and his Royal College network are bad for the health of the Sri Lankan national economy; even worse than the Madamulana brothers, sons, and cronies network. The Rajapaksa mafia made mega bucks from Chinese Development Loans for white Elephant infrastructure like the port, airport, stadium and auditorium in Hambantota while piling on the National Debt, but  Wickremesinghe plans  to sell Sri Lanka’s strategic assets (land, labour, highways, ports, LNG etc), to Hedge Funds that operate from shadowy off shore tax havens controlled by the global 1 percent.  Although he plays economic expert and the technocrat, his economic expertise is hollow; The Vision 2025 was drafted by ‘experts’ at the right-wing Millennium Challenge Corporation (MCC) in Wasinghton DC. Foot notes and books were generated by Harsha de silva and Sujeewa Senasinghe, who followed courses to justify theft of the public wealth at the Central Bank of Sri Lanka, at Harvard’s Center for International Development funded by MCC.

When it comes to looting the wealth of a nation, institutional decay, liberalization sans proper valuation, transparency and accountability to enable asset stripping  by doggy hedge funds  ironically, in the name of “national development’, Wickremesinghe beats them all.  Thus Ranil first captured the Central Bank, removed good people appointed cronies and then stripped it of assets (funds and talent), Ranil’s cronies are now doing the same thing at the National Survey Dept to in order to set up a land bank at BOI and sell off State lands to cronies. Evidence from the Presidential Inquiry into the bond scam clearly shows that Ranil Wickremesinghe and Ravi Karunanyake should be impeached for Grand Larceny. Who would have imagined this scenario in early 2015 when we were euphoric about regime change?

Disruptive Solutions and Technology

Dealing with the debt and international bailout business in the context of transnational corruption networks and a political-economic governance crisis today requires PRO-ACTIVE and out of the box thinking and action including use of disruptive technology. Civil Society needs to think out of the box now. President Sirisena who is nominally less corrupt must be encouraged by civil society activists to immediately pass the National Audit Bill and follow Saudi Crown Prince Bin Salman’s radical initiative to restore the Saudi economy, reputation and fitness for business.

Bin Salman arrested corrupt princes and cronies, including relatives and is keeping them under house arrest in 5 star Hotels until the 100s of billions they stole are returned to the State. Their bank accounts are frozen. Saudi’s Crown Prince has Donald Trump’s backing. Ranil Wickremesinghe, Ravi Karunanayake and their Perpetual Treasuries Bond scam network and the Rajapaksa brothers and sons and Avant Guard network, and Sri Lankans named in Panama Papers should ALL be placed under house arrest while their bank accounts are frozen, until they return the funds looted from Lanka so some of the massive national debt of Lanka may be paid down. This is after all, the US backed Saudi model of dealing with massive corruption and Debt repayment to get the economy back on track.

Civil society needs to reach out to Sirisena to renew his links with civil society groups and pledge to fight corruption through an alliance with JVP, which is the ONLY political party that is interested in addressing corruption. Unfortunately the TNA and Muslim parties which are fixated on ethnic and religious identity politics, have failed to grasp the fact that the failure to build an inclusive and just post-war Lanka is fundamentally due to cronyism and corruption networks: Corrupt politicians use Hate Speech against minorities to distract, divide and rule the masses while they recruit cronies and exclude honest and qualified people, particularly those from minority communities.

As elections approach Ranil Wickremesinghe who seems resolved to ruin or to rule Lanka should “beware of the fury of the patient man” as John Dryden wrote. By now it is crystal clear that Corrupt leaders and politicians are the single biggest ‘enemy within’ the body politic and threat to peace and security.  Finally, a New Constitution should bring in a retirement age of 55 for all politicians, who continue to hog power as this generation is living longer and blocking youth and honest people because of the cycle of Money politics, whereby politicians make money while in office to buy votes and then get voted in a vicious cycle of money politics.

References

Rajan, Raghuram and Subramanian, Arvind AID AND GROWTH: WHAT DOES THE CROSS-COUNTRY EVIDENCE REALLY SHOW?

https://campus.fsu.edu/bbcswebdav/orgs/econ_office_org/Institutions_Reading_List/16._Foreign_Aid_and_Economic_Development/Rajan,_R._G._and_A._Subramanian-_Aid_and_Growth%3B_What_Does_the_Cross-Country_Evidence_Really_Show

Sol Trumbo VilaMatthijs Peters

2017  The Bailout Business: Who Profits from Bank Rescues in the EU. Amsterdam. Transnational Institute

Yunnus, Mohamma

2017 A World of Three Zeroes: The New Economics of Zero Poverty, Zero Unemployment, and Zero Carbon Emissions. Public Affairs.

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Latest comments

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    [Edited out] Comments should not exceed 300 words. Please read our Comments Policy for further details.

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      Jimmy the dimwit

      Brilliant though, you do not need to type in excess of 300 words to prove your stupidity.
      We know you are a practicing dimwit.
      Thanks anyway.

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    Another point is see, those all the NGOs who are getting funds from the west, why they are silent on the bond scandle and keep on talking constitution, war crimes and why Mahinda Rajapske should not be allowed back. Because, they are not for the country. they are for their master. YOu can find so many examples how economic hitman, NGO and many similar organizations have bankrupted or ruined economies if yo search and see.

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      Aid, by definition, is something that is given as help to overcome difficulties, in the financial case on very easy repayment terms or as an outright grant. Our debts are mostly to the Chinese, who supply loans on commercial terms, and not aid.
      The MR regime is responsible for the situation we are in now, having taken loans far beyond our ability to pay. We are saddled with highways that bring people from Matara to Kottawa in 2 hours, only to sit 3 hours in a traffic jam the rest of the way. I will not talk about the empty stadiums/ airports/ ports and “budget” airline, all named after MR the Redeemer.
      It is useful to remember that the ADB refused to fund highway projects saying they were not necessary. How accurate they were in hindsight.

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    The term “Bi-partisan Corruption” coined by Dilini Kalupahana is apt.
    We reached the “Corruption Sans Frontieres (CSF)” without much effort!

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