Archives

by Ravi Ladduwahetty

Some men wrest a living on nature; this is called work. Some men wrest a living on those who wrest a living on nature. This is called trade. Some men wrest a living on those who wrest a living on those who wrest a living on nature. This is called finance. (Vincent McNabb)

History has repeated itself with grisly accuracy. President Chandrika Bandaranaike Kumaratunga who took over the reins of Government in August 1994 as Prime Minister and Minister of Finance and Planning, spared no pains to describe how the UNP had left the country bankrupt.

She was expected to be the guardian angel who was to salvage this nation from the brink of disaster. A new political culture, devoid of state-sponsored terror, where dead bodies were floating down rivers was to be ushered in... A new environment where the devil would not knock on the front door at midnight and abduct the residents and kill them in cold blood.... She was to usher in a new economic and social order.... Much was expected of her politically, socially and economically given the backdrop prevalent at that time.... Dhooshanaya and Bheeshanaya were the buzzwords of PA politicians of across the political landscape of the nation.....

Barely nine days had passed after her assuming office as Premier cum Finance Minister on August 19, 1994 that a private owned newspaper screamed in a Page One lead story on its August 27, 1994 edition "Probe on General Treasury on orders of PM- monies used to buy luxury vehicles for former Ministers- Deficit more than Rs. 80 billion...."

"The story explained how the then Premier cum Finance Minister after a visit to the Treasury, had found that there was a deficit of Rs. 80 billion and some of the monies had been used to buy luxury cars for Ministers of the previous Government and that Ms Kumaratunga as Finance Minister wanted the cars returned immediately as the former Ministers did not want so many.The story also said that Rs. 700 million has been transferred to the national carrier.....

Augean stables

Within nine days of her assumption of office and on August 28, 1994, an abortive US$ 72 million arms deal which was transacted by the previous UNP regime, hot on the heels of the 1994 Parliamentary Polls, was cancelled by the new Prime Minister of the day, of whom was said that the time was ripe to clear the Augean stables.

Then, there were scathing attacks that Treasury funds to the tune of Rs. 300 million and cement had been channelled to the LTTE. Allegations were rampant that vital state sector institutions were divested to cronies at rock bottom prices.

Some such instances were the privatisation of the Nylon 6 Plant at Sapugaskanda and moreso, Kelani Tyres Ltd. The latter, whose shares were valued at Rs. 25.64 per Rs.10 share by the Government valuer, was sold at Rs. 8 to bicycle giant- Avon of India (under the corporate name Nova Lanka Ltd, who was also provided with Rs. 275 million in loan capital to buy the controlling stake (60 per cent in this instance) of the company!! This was at a time when Sri Lankan commercial legislation did not provide for such measures which are known in the west as Leveraged Buy Outs (LBOs)..............

Tryst of destiny

In a macabre tryst of destiny seven years later, now we have it from no less than the incumbent Finance Minister K.N. Choksy (who was Minister of Constitutional Affairs in the Premadasa Government) barely a week of his assuming office, that the national economy, right now, was more fragile than a cut glass ash tray!

Fiscal incongruence

According to him, there is a drop in estimated Government revenue by Rs. 30 billion as the budgeted figure was Rs. 264,479 million and the current estimate was Rs. 30.4 billion.

The increase in the operation expenditure of the Government was Rs. 9827 million, up from the 281,384 million to Rs. 291,221 million. The major items which have contributed have been due to increase in public salaries by Rs 2380 million, interest payments on public debt by Rs. 4282 million, increase in pension payments by Rs. 1593 million, underestimated Samurdhi payments by Rs. 2300 million and the fertiliser subsidy by Rs. 1200 million. The list is endless......

The overall budget deficit which was earlier estimated at 8.5% of GDP was Rs. 123,058 million. It is currently estimated at 10.5% of the GDP which is Rs. 148,139 million.

The shortfall in privatisation revenue is Rs. 16,411 million which is a result of the current estimate being Rs. 8589 million over the previous estimate of Rs. 25,000 million. Domestic borrowings have also increased from the earlier estimate of Rs. 69,095 million to Rs. 118,095 million. There has been a sum of Rs. 44,599 billion borrowed from the banking system and also Rs. 30 billion from the two state banks.

There have been five public enterprises which have been accumulated losses to the tune of Rs. 55.8 billion which are: CPC-Rs. 21.5 billion, CEB- Rs. 21 billion, CWE-Rs. 8.3 billion, Railways and Postal Department- Rs. 2.3 billion and CTB- 2.1 million.

Moreover, according to him, the monetary losses from the key state institutions such as the Ceylon Petroleum Corporation, Ceylon Electricity Board, to name a few, are gargantuan. The Government owes the state banks over Rs. 30 billion. Every calamity is astronomical.......

The economic backdrop of the country according to many is in absolute peril at the time the United National Front has taken over the reins of Government.

The projected economic growth rate is below zero for the first time in independent Sri Lanka and is projected at -0.6 per cent of GDP. This dismal performance has been reflected in the three cornerstones of the economy- agriculture, industry and the service sectors. The single largest challenge for the UNF Government which assumed office a few weeks ago, is to surpass the zero mark and also bring it to around five per cent for 2002 and raise to 7 to 8 per cent between the next three years.

The second challenge is to bring down the budget deficit to a single digit and also to accrue the GST from which levies could be drawn. Productivity has also to be improved. The third is to increase capital investment. Right now, capital investment is around 28% of GDP of which 6% is by the state and the remainder coming from the private sector.

The Government's infusion of Capital Investment comes in the form of agricultural investments such as planting and replanting, construction in the commercial sector and other forms of social infrastructure such as roads, hospitals etc.

Lost confidence

It was also tragic that both local and foreign investors have lost confidence in the recent past and they have not only stopped their capital investments in Sri Lanka, but they have relocated them overseas. The fourth is to boost investments to 35%- 40 % of GDP so that the economy will be more stable. It will be decided by the Government as to what type of incentives and tax concessions have to be given in the 2002 Budget which is expected to be presented in Parliament in March so that they could be bolstered.

The fifth is to rectify the budget figures for the year 2001. Without the attainment of the projected revenues for 2001 through privatisation or the normal tax levies due to external factors and in the immediate aftermath such as the BIA bomb blast, the World Trade Centre attack in New York which had a series of deleterious impacts on the export/imports, shipping and tourism industries.

It has also been noted that the foreign aid has not been utilised at all. Of a total of US 3745 million which has been received from the World Bank, IMF and ADB, only a measly 238 million has been used amounting to 13 percent of the total. It is also incumbent upon the Government to draw up projects for these before the aid is withdrawn by the donor concerns.

All this is a financial quagmire. Also on the defence side, we have recurring expenditure amounting to Rs. 80 billion and some expenses not having even Treasury approvals.One of the primary reasons for this long-standing fiscal decadence has been attributed to the absence of a full time Finance Minister answerable in Parliament, the last being civil servant turned politician Ronnie de Mel in the J.R. Jayewardene Government who also holds the Guiness Book Record for presenting a record eleven consecutive budgets.

Presidents R. Premadasa, D.B. Wijetunga and Chandrika Bandaranaike Kumaratunga retained the all important Finance portfolio for reasons best known to them. It is only now that we see a full time Finance Minister in Constitutional Lawyer K.N. Choksy.

It is also refreshing that Prime Minister Ranil Wickremesinghe has extricated himself from all Cabinet portfolios even in contrast to his previous incarnation as Prime Minister where he held the portfolios of Industries, Science and Technology in the immediate aftermath of President Premadasa's assassination.

It is also positive that he has kept the vital portfolio of Policy Planning and Implementation in the present UNF Government where he could oversee/ coordinate all affairs of line Ministries where all will get equal priority and attention.

This is in contrast to President Kumaratunga who not only held the vital portfolios of Finance and Defence, but seven other portfolios including media during the probationary Government with the JVP. In an incredible deviation from tradition, and another first in independent Sri Lanka, the Defence portfolio has been relocated from the Head of State in the present UNF Government.

There is a full time Defence Minister in President's Counsel Tilak Marapone. Even in President's J.R. Jayewardene's cabinet, he retained the Defence portfolio. Trade and Shipping Minister Lalith Athulathmudali was appointed as Minister of National Security in the rank of a Project Minister while he was also Deputy Minister of Defence in addition to his Ministerial portfolio. General Sepala Attygalle was Secretary to the Ministry of Defence while Cabinet Secretary G.V.P. Samarasinghe served simultaneously as Additional Secretary to the Ministry.

Revamping the state sector

Revamping of the state sector institutions have commenced and Justice Minister W.J.M. Lokubandara has already announced that anyone who is guilty of corruption in the state sector will be dealt with where he will have to pay back with his pension. He has also assured that stringent legislation will be enacted shortly in this regard. Commerce and Consumer Affairs Minister Ravi Karunanayake has already spelt out that additional business lines will be brought into the CWE to absorb redundant staff and also to make the entity commercially viable.

Corruption in the previous regime has been so rampant that the subsidy given to milk foods have been "swallowed" by some and the milk prices also did not decline. The subsidy has also gone unaccounted. Now this Government has reduced prices without subsidies. Other issues of corruption and profligacies range from the privatisation of Shell Gas Lanka Ltd, which enjoyed a straight five year monopoly, being given further subsidies during the PA-JVP probationary regime!!

Losses of state entities have to be cushioned. There are no quick fix solutions. There are over 40,000 employees who have been politically recruited and bringing the corruption and wastage in these institutions to a halt could save the state a further Rs. 50 billion.

Nation building

Now, the time has come to engage in nation building. The Premier has led from the front by cutting down expenditure drastically in laying out policy. Each Minister is entitled to only one car and only security personnel of a maximum of 6-7. Remuneration of Ministers and Deputy Ministers will be those of Members of Parliament for the first two years. This is in contrast to PA Ministers having up to 25 official cars and 115 security personnel.

The most daunting challenge of the UNF Government is to act with a sense of responsibility and political maturity where team spirit and coordination are the features of the day, where performances are consistent and controlled, unlike the previous Governments since 1977 where profligacies and corruption were rampant.Economic development to suit devious political agendas must stop.

Transparency, a much touted word of the PA in Opposition in 1993, eventually turned out to be grossly malodorous.

Look at neighbouring India. The Indian Prime Minister, custodian of a populace in excess of a billion people, travels in a domestically manufactured Hindustan. For security reasons, it is bullet proof.

This writer is positive that no voter would grudge his legislator travelling in a comfortable yet trouble free car. But why this unbridled indulgence?

A Chairman/Managing Director/CEO of a Colombo Stock Exchange quoted blue chip, be it bank, manufacturing concern/trading house dashing about in a multi- million rupee leather upholstered Volvo/Benz/BMW to promote business for his entity is not something that his shareholders would grudge. That is a personification of the corporate ambience in which mega-buck business is transacted.

If the shareholders are not in consonance with this ethos, they yet have the option of evicting their corporate planners and messiahs at the ensuing Annual General Meeting. They have not done so for the simple reason that the profits and the dividends show!

Similarly, very few persons will be overtly solicitous about an inheritor of a family heirloom running about in a Ferrari or a 4.2 litre Jaguar and even if he/she crashes or torches it!

However, for a politico who designates himself as Minister/Deputy Minister, who professes to be the guardian angel of the peoples' rights and who seeks a mandate exclusively for that purpose and that only, and whose name is prefixed:" Honourable" and who is on a remuneration package of Rs. 15,000 and allowing himself to be basking in the glory in the rear seat of such a limousine, (with a Lion Flag mounted on a steel pennant and fluttering in the breeze to boot), and be steered around in a nation where 80 percent of the inhabitants are living in abject poverty without basically three square meals a day, is to say the least, indubitably criminal.

It smacks of bigotry! The new Prime Minister has spelt out that he will be running a very orderly administration and he has always maintained the image of Mr. Clean from the time he was a member of President Jayewardene's Cabinet along with former Health/Agriculture Minister Gamani Jayasuriya who were all deemed "above board".

The new Premier's commitment to transparency and the policy of ushering in a new political and bureaucratic culture could for a start commence by publishing the details of all tenders that have been awarded by the Government such as in the Annual Report of a listed company. That will ensure that the public (the stakeholders in this instance) will be made aware of all transactions of the Government and precise details such as who was awarded what and what quanta etc.

So, what we need is transparency. If that is the spirit that we want it in, then it has to be transparency literally and that too, to the point of nudity!

This is not the time for remorse. No bickering and pointing fingers at the adversaries saying: "so-and-so did so and there is nothing wrong in our doing it" as we have heard so habitually across the floor of the Chamber of Parliament!!

The biggest overall challenge of the United National Front Government led by Premier Ranil Wickremesinghe would be not only to revamp the beleaguered economy which has torn at its seams, but also to ensure that lasting peace is ushered in so that private sector led growth could be accelerated in top gear.

This will ensure an environment where all can live in a spirit of equality where opportunities are equal. The nation has bled enough. After 53 years of independence, we, Sri Lankans, deserve better.

In the furtherance of this end, this writer is reminded of the soul stirring utterance of Greek biographer Plutarch: "The spirit of MAN lies in his devotion to a cause and if his cause be just and his spirit in total, then his spirit is GOD."

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager