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by Lloyd F. Yapa

The peace process is on course thanks to the innovative 'step by step' approach of negotiations (with a bottom line of a united Sri Lanka) adopted by the UNF government as opposed to that of the positional bargaining process adopted earlier.

But it is noticeable that the euphoria, that prevailed immediately after the signing of the MOU with the LTTE is waning. Why? There appear to be a number of reasons for this deterioration. One main reason is the lack of consultation among important stakeholders for obtaining consensus on relevant issues.

This is partly due to the 1978 constitution, which has brought two opposing forces to the fore - the Head of State, whose political party the PA, which was voted out of power at the last general election on the one hand and the UNF coalition, which was voted in with a different set of policies to form a new government on the other. This lack of consultation has given rise to a cacophony of criticisms (from the stakeholders reduced to bystanders) of the moves, right or wrong, taken by the UNF government, especially the so-called concessions made to the LTTE, little realizing the need to build the latter's trust and confidence to enter the political mainstream.

The PA now aligned with the extreme leftist JVP is flexing its muscle to trip the UNF, the people's choice at the last parliamentary election, off its pedestal, by resorting to undemocratic methods. The people are confused, especially in the absence of correct information as to what is going on and fearful, that the peace process as well as the looming opportunity of developing the battered economy of the country with much needed foreign assistance is about to be thwarted, may be for ever.

They can only hope, that good sense will prevail and the Head of State will see it fit, in the national interest, to help the government to finish the tasks it started, with a mandate from the people. An obvious reasons for the deterioration of the situation in the country is the inability of any of the major political parties to form a strong government, without forming loose coalitions with smaller parties due mainly to the prevailing system of proportional representation.

Such governments invariably find, that they are not able to take a clear course of action, when bold decisions have to be taken for the greater good of the nation. A case in point is the impossibility of getting a two-thirds majority in the event of a political settlement to the ethnic conflict is finally arrived at. The people including the investors are aware of this problem and are jittery and pessimistic.

The economy

The logical way out for such governments is to collaborate with the opposition, which in turn should endeavour to support the government of the day, where strategies/policies impinging on socio-economic development of of the nation are concerned.

In the face of a large budget deficit, the main components of which are unproductive expenditure on debt servicing, defence, wages and salaries for a bloated public service and welfare subsidies, the course of action available to a government is to either increase revenue by imposing higher taxation and/or better collection thereof, while reducing unproductive expenditure and resorting to privatization of public enterprises, which have to be propped up by subsidies by the government at one time or other. In other words reduction of budget deficits and the money supply are essential to limit the growth of demand for goods and services, when there is no excess supply capacity.

Such a process, though necessary for stabilizing the general level of prices, thereby lowering inflation and increasing the purchasing power of the people in terms of goods and services, could take a couple of years.

It could, however, lower the standard of living of the poor and of fixed income earners in the short-term.

Hence, the clamour from workers for higher wages. Unfortunately, just increasing wages, in nominal terms, would lead to a reduction in the purchasing power or real incomes, as prices could rise faster due to the consequent rise in demand.

This is not a propitious time for increasing wages for several other reasons - the economy is being buffeted by various shocks, such as oil price hikes and reduction in demand for our export products due to downturns in the main economies of the world.

The authorities should repeatedly explain to the people, that their real incomes, would increase eventually, if such a process is adopted in the near term. In the meantime, it is incumbent on the authorities to cushion the poorest of the poor the impact of inflation by ensuring the continuance of a better targeted 'safety net' like the 'Samurdi' payments system and bide for a better time to raise wages. Such decisions, as reducing the budget deficit by pruning welfare payments and over-expenditure, withstanding pressures for wage increases and freezing recruitment are difficult decisions for a government without a comfortable majority in parliament. It is to the credit of the UNF government, that it has weathered most such storms and performed reasonably well, despite the lack of a comfortable majority in parliament.

The liberalization of the labour, land and capital markets for improving (international) competitiveness by getting the prices such as wages, rents, interest and exchange rates on par or competitive with those of the rest of the world, to clear the deck for a faster rate of economic growth, especially through export expansion, is also difficult for such a government, due to lack of consensus and as vested interests with political support could stand in the way.

There are other manifestations of this difficulty like the delay in development of infrastructure facilities, for example for ensuring an uninterrupted power supply for economic activities and for lighting, by the setting up of coal-fired plants and the implementation of foreign exchange saving hydro projects like the Upper Kotmale Project.

The Iraqi war has shown in no uncertain terms, to what extent our country is dependent on imported oil. The excuses totted out by the forces opposing these projects are, such projects will degrade the environment, forgetting the fact, that much more harm has already been caused by the denudation of the forest cover, mostly in the catchment areas of the rivers, that feed the country and the pollution of these waters by the heavy use of chemicals by farmers and very poor disposal of solid waste including sewage by the inhabitants (of these areas). This is what has to be prevented.

If this process goes on unabated, the growing population of the country is in danger of a serious shortage of water for drinking and other purposes. Opponents of such development projects should realize, that the extra hydro-power generated will not only save foreign exchange, but also help to draw more people from the land into industries, thus reducing the over-exploitation of nature, Sri Lanka's problem being the high percentage of people depending on the land for a livelihood - 36% of the labour force as against less than 4% in developed countries. The authorities therefore have much explaining to do.

Notwithstanding what was stated above on not giving in, to pressures to for nominal wage increases, when the general level of prices is rising due to deficit budgeting, a government can in fact raise wages, if the economy can be set on a path of significant growth, as the revenue of the government would also rise in tandem. There are signs, that the government has succeeded in doing so already to some extent; however, much more has yet to be done.

This can only be achieved by increasing production of goods and services significantly, through, investment, while improving productivity.

But investors are normally cagey about risking their capital in an environment of uncertainty arising from the problems described above. Mere reduction of interest rates or extension of further incentives may not induce investors to commence projects to produce more goods and services, while creating additional employment opportunities, if they feel, that they have to face an uncertain future.

On the other hand, if interest rates on deposits fall, vulnerable groups like pensioners, who depend on their savings maybe left in the lurch, as their incomes will also drop in line with falling interest rates, besides discouraging potential savers. The latter tendency will lead to a drop in the amount of savings available for investment.

Investors will also be put off by poor law and order conditions, rigid labour markets and administrative inefficiency, which incidentally is partly responsible for the delay in implementation of rehabilitation projects in the North and the East, besides the absence of local government institutions in these areas.

Administrative efficiency cannot be achieved with two sets of bosses setting different and conflicting objectives - one on the continuance of the expensive welfare measures built up by politicians of all previous governments and state control and the other on pruning welfare measures, divestment of public enterprises (used as dumping grounds for political henchmen/women), while emphasising on economic growth. If the people opt for the former set of objectives, they could well be choosing a path to indebtedness and poverty.

The administration

The latter set of objectives is obviously the way out of the economic morass the country is in, clearly depicted by the fact, government revenue is only 17 per cent in GDP terms, while expenditure is 27 per cent - most of its not generating any additional wealth for the country and the people. So growth (in a context of low inflation) is essential to increase real incomes.

Public servants, who are called upon to implement government programmes, apart from being compelled to pursue two conflicting sets of objectives/instructions, have to cope with a bewildering set of other agendas sprung on them by a multiplicity of ministries (the responsibility of which should be the conversion of national strategies into ministry strategies).

What is worse, they have to take instructions from heads of organisations, some installed by one boss or other. There is a need for most of these Heads of Departments/Agencies to be exposed to modern methods of management, especially human resource management, to inculcate skills of converting national or ministry goals/objectives to their own organisational objectives/targets and motivating their personnel to achieve them. Speaking about motivation of public servants, one must admit, that they are seething with discontent on account of the mess created by decades of political meddling; in other words, the inefficiency of the public service is mainly attributable to this failure on the part of its overall leadership, including politicians.

We have now come full circle back to the need, even at this late stage, to do first things first - follow a sequential order of implementing strategies to achieve peace and prosperity, after obtaining public consensus. The priorities in a logical order are:

1. Devising some standing institutional arrangements to build bridges between the Government and the PA as well as other political stakeholders, especially to avoid the non-conclusion of the peace process.

2. Adoption of a joint approach to conclude the negotiations successfully and finally to change the constitution, to install only one chief executive (who is answerable to Parliament and the people without immunity from legal action), the system of elections to ensure stable governments and to sever the link between the politicians and the public service in order to put an end to all types of politicisation and corruption.

The LTTE will get the message, that they are dealing with the entire majority of people in the country, feel more confident, that they could achieve a satisfactory conclusion to the ongoing negotiations, hopefully stop their undemocratic heroics, concentrate hard on the task of achieving peace and entering the political mainstream.

3. Hammering out a consensus with regard to economic development strategies and programmes, with various political parties, trade unions and businesses for the liberalisation of the labour market, as well as the land market. The latter is essential to motivate farmers to invest in the land, thereby improve agricultural productivity.

Continuous public support is also necessary for the successful implementation of the economic strategies adopted by the Government. For this purpose frequent explanation, communication and clarification of the economic goals, objectives and strategies adopted by the Government as well as the desired outcomes are essential. In this regard, it is also necessary to emphasise on poverty alleviation, in addition to the Government's objective of economic growth, as not much reliance can be placed on the trickle-down-effect of the latter, going by past experience.

The people will then use these goals, objectives and strategies as a framework of reference on their path to achieve their personal aspirations, thus marrying the national goals with the personal, which is what is desirable.

4. Reorganisation of public (central and local) institutions, after obtaining the consensus of all stakeholders, to improve their efficiency to implement programmes of development speedily, be impartial and quick in dealings with the public and investors. This should include setting up of local government institutions in the North and the East speedily to share the Government's burden of rehabilitation of these areas.

The adoption of such a sequential or 'first things first' approach built on a process of achieving consensus among stakeholders, by no means will ensure success, if commitment and co-ordination are absent. This is where good leadership comes in. It is they, who have to commit themselves to deliver results to satisfy the aspirations of the people. This is what is expected of them, when they are elected.

After assuming power, if they continue to resort to skulduggery for political expediency, instead of showing results speedily, the trust and the faith of the people in democratic methods to realise these objectives, will be destroyed. Such a development is bound to fuel a tendency on the part of certain groups to make a grab for power to rule the country or parts of the country by force.

Therefore, it is time for all NGOs of the people to join hands and appeal to the leaders to preserve democracy and adopt an approach such as the above, to be able to deliver desired results.

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