{"id":117958,"date":"2014-01-05T14:02:35","date_gmt":"2014-01-05T08:32:35","guid":{"rendered":"https:\/\/www.colombotelegraph.com\/?p=117958"},"modified":"2014-01-17T03:47:52","modified_gmt":"2014-01-16T22:17:52","slug":"the-bubble","status":"publish","type":"post","link":"https:\/\/www.colombotelegraph.com\/index.php\/the-bubble\/","title":{"rendered":"The Bubble"},"content":{"rendered":"

By Tisaranee Gunasekara<\/span><\/a> –<\/strong><\/p>\n

\u201cAll that is solid melts into air, all that is holy is profaned\u2026\u201d. –\u00a0<\/i>Marx and Engles (The Communist Manifesto)<\/i><\/p>\n

Once upon a nearly-forgotten-time, there was a corporate colossus in America called Enron. Courted by politicians and feted by the Wall Street, Enron was named \u2018America\u2019s most innovative company\u2019 by the Fortune<\/i> magazine for 6 consecutive years.<\/p>\n

But Enron\u2019s greatest feat of innovation was also its most closely guarded secret: creative book-keeping. Enron habitually fudged accounts to grossly exaggerate its profits[i]<\/a>. When the elaborate hoax began unravelling, Enron\u2019s high-flying Chairman, Kenneth Lay[ii]<\/a> and other top executives bailed out, selling their stocks at huge profits[iii]<\/a>. Enron\u2019s blue and white collar workers were banned from selling their shares in time; they lost their life savings and pensions in consequence.<\/p>\n

\"The<\/a>

The Siblings know that eventually the bubble will burst<\/p><\/div>\n

The Economist<\/i> blamed \u201cshoddy accounting, greedy managers and lousy investment decisions\u2026..\u201d[iv]<\/a>, for Enron\u2019s debacle and the subsequent bursting of the American stock market-bubble.<\/p>\n

Under Rajapaksa Rule, Sri Lanka is going the Enron-way, as Parliamentarian Anura Kumara Dissanayake reconfirmed last month.<\/p>\n

No sensible government will deliberately undermine the integrity of its national accounts. But familial regimes are no more sensible than neo-liberal corporations. Both types are single-minded in pursuing their private aims; since personal profit\/familial power is their raison d\u2019\u00eatre<\/i>, they will pursue it at all costs, even to the point of total ruin.<\/p>\n

HS Wanasinghe, a statistician with 30 years experience, was the former Director of the National Accounts Division in the Department of Census and Statistics – until he was ejected. In the statement he made at the disciplinary inquiry[v]<\/a> Mr. Wanasinghe details what happened after he sent the 5.4% estimated growth rate for the first quarter to the Director General: \u201cOn June 6th<\/sup> 2013, the Director General called me at around 8.30pm on my mobile phone\u2026. Thereafter he said he had looked at the estimates I sent him (of 5.4%). He wanted me to re-check the Agriculture, Banking, Internal Trade, Electricity, Food and Tobacco Divisions. He said I should be mindful of the interpretations already released by the Treasury and the Central Bank.\u201d[vi]<\/a><\/p>\n

On June 13th<\/sup>, after extensive discussions with relevant officials, the growth rate was calculated at 5.5%. According to Mr. Wanasinghe, \u201cOn June 14th<\/sup> 2013, I presented the national accounts for the first quarter to the Director General by way of an email at 4.53pm. Thereafter I went to my home\u2026because it was the weekend. I was not present at the office on June 17th<\/sup> as I was not well and I informed the Deputy Director General Nigamuni. Half and hour later Ms. Nigamuni called me and told me that the Director General had insisted on the economic growth rate being changed to 6.0%\u201d[vii]<\/a>. The Deputy DG wanted an immediate change from 5.5% to 6%, \u201cbecause the Director General was insisting on it being done\u201d.<\/p>\n

Under Familial Rule, the state moves to the Rajapaksa-tune. The Siblings must have superlative growth to substantiate their counter-factual claims about development miracles. So the politicised Central Bank must get the Department of Census and Statistics to supply suitable figures.<\/p>\n

The first warning about the Rajapaksa predilection to conjure happy statistics came from the Auditor General. In his 2006 report to parliament, the AG stated that tax and export income statistics of the government are misleading. The Finance Ministry, instead of taking remedial measures, took the AG to task: \u201cSri Lanka’s Finance Ministry has disputed a report by the auditor-general that weak collections led to a revenue loss of 360 billion rupees\u2026<\/b>. It also rejected the auditor-general’s assessment of 22 billion rupees in tax arrears, saying that the figure needs to be ‘revisited’\u2026.<\/b>\u201d[viii]<\/a>.<\/p>\n

In a similar vein, Ajith Nivard Cabraal (accountant cum failed politicians turned Central Bank Governor – another Rajapaksa first) dismissed Mr. Wanasnghe\u2019s statement about fudged growth figures and \u201cwarned detractors not to go to the extent of undermining the entire data gathering process to meet their own ends\u2026.\u201d Pressed to comment on Mr. Wanasinghe\u2019s allegations, Mr. Cabraal said that \u201che personally looked into the case and found no reason to doubt data from the department.\u201d He claimed it was \u201can isolated incident and a response has already been filed by the Census and Statistics Department.\u201d [ix]<\/a><\/p>\n

In other words nothing will be done. Since Rajapaksa justice is as compromised as Rajapaksa statistics, Mr. Wanasinghe will lose his fundamental rights case. His fate will serve as an example to his colleagues; silence will fall, until, someday, the financial dam breaks.<\/p>\n

Enron Way<\/strong><\/p>\n

In February 1987, two officers from Enron\u2019s internal-audit department presented Chairman Kenneth Lay with evidence that \u201ctwo of his underlings had cheated his company\u201d[x]<\/a>. The auditors did not know that fraudulence was Enron\u2019s ethos, fudging books was literally a company policy and Chairman Lay was both a perpetrator and a beneficiary[xi]<\/a>.<\/p>\n

In Sri Lanka too no remedial measures will follow Mr. Wanasinghe\u2019s revelations just as no remedial measures followed the AG\u2019s warnings because books are being cooked to make reality confirm with Rajapaksa developmental boasts (Just as the crass lie about zero-civilian casualties was maintained for years to buttress the \u2018Humanitarian Operation\u2019 myth).<\/p>\n

In 2007, the Supreme Court faulted the Rajapaksa government for excluding Rs.\u00a0 722billion in debt service payments in the budget and for misusing funds earmarked for development: \u201c\u2026.nearly Rs 21billion have been transferred by the Treasury officials \u2026 The transfers reveal that that many of them have been for foreign travel, purchase of vehicles and other miscellaneous items of expenditure far removed from \u2018Development Activities\u2019\u201d[xii]<\/b><\/a><\/b>. In 2012, the Auditor General warned about serious accounting deficiencies and management inefficiencies in the EPF: \u201cThe AG had found that more than Rs. 62million recovered during the period 2005-2008 as EPF members\u2019 contributions and surcharges recovered by courts had been credited to the government revenue in 2010 without being credited to the members\u2019 personal accounts\u201d[xiii]<\/a>.<\/p>\n

The Rajapaksas will continue their financially homicidal-suicidal way by imposing more burdens on people and incurring new debt. Prices of essentials are set to rise steeply this year, due to tax increases in the 2014 Budget. Inflation, of course, will remain stable or perhaps even decrease.<\/p>\n

Already Sri Lanka\u2019s debt is at Rs. 5.63trillion. The regime is planning to raise US$ 1000million from sovereign bonds with a 10 year maturity period. So far 5 such bonds have been issued totalling US$ 4000million; the first bond of US$ 500million was paid in 2013 by issuing a new bond for US$ 1,000million; the next bond is to mature in 2015.<\/p>\n

In 2013, the total cost of debt servicing was US$ 1,500million (Rs. 1070billion).[xiv]<\/a><\/p>\n

In 2004, the US government began prosecuting Chairman Lay and other top Enron executives[xv]<\/a>.<\/p>\n

So long as the Rajapaksas rule, the frauds perpetrated on their orders\/in their interests will go unpunished. As the financial\/economic conditions turn increasingly sour, and the development-con begins to unravel even faster, more frauds will have to be perpetrated to fool the populace. Until someday, objective realities reassert themselves with overwhelming destructive force.<\/p>\n

The Siblings know that eventually the bubble will burst. That is why they are strengthening and Rajapaksaising the military. If Sinhala-Buddhists cannot be hoodwinked into attacking the minorities, the military can be ordered to shoot Sinhala-Buddhists.<\/p>\n

\n
\n
\n

[i]<\/a> Enron overstated its profit by US$ 600 million in 2000, the year before it collapsed.<\/p>\n<\/div>\n

\n

[ii]<\/a> A close friend of the Bush family and a major donor to the Republican Party; President George W Bush reportedly wrote notes and cards to his friend, \u2018Kenny Boy\u2019.<\/p>\n<\/div>\n

\n

[iii]<\/a> Mr. Lay made US $ 37,683,887; he and others were successfully prosecuted subsequently.<\/p>\n<\/div>\n

\n

[iv]<\/a> The Economist \u2013 22.6.2002<\/p>\n<\/div>\n

\n

[v]<\/a> This statement was subsequently included in his Fundamental Rights petition and was read out in parliament by MP Dissanayake during the recently concluded budget debate.<\/p>\n<\/div>\n

\n

[vi]<\/a> http:\/\/www.dailymirror.lk\/news\/40662-official-alleges-growth-rate-massaged.html<\/a><\/p>\n<\/div>\n

\n

[vii]<\/a> Daily Mirror \u2013 24.12.2013<\/p>\n<\/div>\n

\n

[viii]<\/a> LBO \u2013 6.6.2007 \u2013 emphasis mine<\/p>\n<\/div>\n

\n

[ix]<\/a> Financial Times \u2013 3.1.2014<\/p>\n<\/div>\n

\n

[x]<\/a> Conspiracy of Fools: A True Story \u2013 Kurt Eichenwald<\/p>\n<\/div>\n

\n

[xi]<\/a> http:\/\/www.sec.gov\/news\/press\/2004-94.htm<\/a><\/p>\n<\/div>\n

\n

[xii]<\/a> http:\/\/www.tisrilanka.org\/pub\/li\/pdf\/SC%20Determination%202008.pdf<\/a><\/p>\n<\/div>\n

\n

[xiii]<\/a> The Sunday Times \u2013 15.7.2012<\/p>\n<\/div>\n

\n

[xiv]<\/a> Daily Mirror \u2013 20.12.2013<\/p>\n<\/div>\n

\n

[xv]<\/a> Mr. Lay was convicted of six counts of fraud and conspiracy and four counts of bank fraud, but died before he could be sentenced. Several of his colleagues are serving jail terms.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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