Wednesday, 29 June 2022

How bankruptcy paves way for exploitation of Sri Lanka



First row (from left) Chief Financial Officer, Ports and Shipping Ministry Sandhya Pushparani, Director J.R.U. de Silva, Ports and Shipping Secretary K.D.S. Ruwanchandra, and Chairman, SLPA Dr. Prasantha Jayamanna. Director, SLPA Isuru Balpatabendi,and Chairman Jaya Container Terminal Attorney-at-Law Lakmal Ratnayake on the second row (pics courtesy Parliament)

Mismanagement of cash cow SLPA, where still it’s carry on as usual

By Shamindra Ferdinando

The United States is keen to further enhance and consolidate its role in Sri Lanka. The current turmoil that has been caused by waste, corruption, irregularities, mismanagement of the economy over the years as well as a spate of ill-advised decisions taken by the incumbent administration would facilitate the US strategy here. The global fuel and food crises caused by Russia rushing into a quagmire in Ukraine, essentially tailor made by the West, as happened to its predecessor the Soviet Union in Afghanistan earlier, has further debilitated the Sri Lankan and many other economies.

The failure on the part of the ruling SLPP and the Opposition to reach a consensus regarding a common action plan to face the daunting economic challenges, has assisted the U.S. and common ‘Quad’ approach towards Sri Lanka. The organization consists of the U.S. Japan, Australia and India, the last now more or less a reluctant bride.

The U.S. wants to strengthen Sri Lanka’s accounting and auditing sectors as part of its overall measures to improve the public sector here. Other ‘Quad’ members are pursuing combined as well as individual strategies pertaining to Sri Lanka. India is now in a position to dominate Sri Lanka in every aspect. The push to expand network of Lanka IOC service station is a case in point.

Speculation is rife of New Delhi seeking to further enhance its share of the oil market here in a situation of utter economic turmoil caused by unprecedented shortages.

The recent announcement that the USAID (U.S. Agency for International Development) would partner the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Association of Public Finance Accountants of Sri Lanka (APFASL) to toughen Sri Lanka’s accounting and auditing sectors was amidst the worst ever economic turmoil. The US project, according to a statement issued by the U.S. Embassy in Colombo, is meant to train approximately 600 public sector accountants and audit professionals and 1,200 officers on IT applications and other platforms that support strategic decision-making.

U.S. Ambassador Julie Chung declared at the launch of the project the partnership with CA Sri Lanka and APFASL would contribute towards greater accountability in the public sector. The Embassy, in a statement issued on June 15, 2022, quoted Chung as having said that as one of Sri Lanka’s longstanding development partners, the U.S vision was to help the country to emerge from crises stronger than before.

The statement also quoted Sanjaya Bandara, President of CA Sri Lanka, as having said that “Strong public financial management is very critical for Sri Lanka to achieve its long-term goals. President of APFASL V. Kanagasabapathy profusely thanked the USAID for the recognition of its efforts. The U.S. Embassy quoted Kanagasabapathy as having said that APFASL’ vision was to lead the public financial management to excellence while helping the sector to continue to play a pioneering role in Sri Lanka.

The countrywide U.S. project, according to the statement, is meant to provide a framework for the preparation and presentation of financial statements in compliance with international best practices for quality financial accounting and reporting. Having published the US statement, the writer asked the Embassy whether it would be possible to know the total cost and duration of the project and who would receive the funding?

The Island received the following response: “This initiative is a series of trainings supported by the United States. The training will be attended by public sector accountants and audit professionals to strengthen oversight and accountability capacity in Sri Lanka.”

The Island again asked the U.S. Embassy whether it would be possible to know the total cost of the project. We received the following second response: “This initiative includes 24 training programmes over the course of two years. Training programmes will take place in all 9 Sri Lankan provinces.”

After having thanked the U.S. Embassy, The Island once again repeated the question how much the project would cost the US? The Embassy didn’t respond to that query. That was nearly two weeks ago.

Question mark over 2016 US project

The latest project can be examined taking into consideration the high profile USAID funded three-year project launched in late Nov. 2016. Budgeted at USD 13,000 mn (Rs 1.92 bn), the project launch that took place in Parliament under the auspices of the then Speaker Karu Jayasuriya and USAID Mission Director Andrew Sisson, the gathering was told the Strengthening Democratic Governance and Accountability Project (SDGAP) would improve strategic planning and communication within government and Parliament, enhance public outreach, develop more effective policy reform and implementation processes, and increase political participation of women and underrepresented groups in Parliament and at local levels.

Had that project achieved stated goals, Sri Lanka wouldn’t be in the current predicament. It would be pertinent to mention that the U.S. finalized the project over eight months after the then Central Bank Governor Singaporean national Arjuna Mahendran perpetrated the second far bigger Treasury bond scam. So were all those American efforts nothing more than a smokescreen for other agendas?

The CBSL perpetrated the first scam in February 2015, just few weeks after the US-backed campaign installed Maithripala Sirisena as the President, which they shamelessly crowed about publicly with none other than then Secretary of State John Kerry announcing it to the world. Mahendran carried out the second bond scam in late March 2016, half a year after the UNP won the general election.

The release of the unedited video footage of the examination of public enterprises undertaken by the parliamentary watchdog, the Committee on Public Enterprises (COPE) under the leadership of Prof. Charitha Herath MP has exposed unbridled waste, corruption, irregularities and mismanagement of state enterprises. Unfortunately, the media and the civil society hadn’t taken advantage of the availability of such video footage released by the Parliament to educate the public. The press releases issued by the Parliament on proceedings at the COPE, COPA (Committee on Public Accounts) and COPF (Committee of Public Finance) quite clearly helped the media, but video footage provided much clearer picture of the developments taking place.

The video footage of the Sri Lanka Ports Authority (SLPA) top management appearing before the COPE on June 22, 2022 is a case in point. The proceedings revealed not only a pathetic state in public sector finance but the failure on the part of the executive, legislature and the judiciary to address these issues at hand. Prof. Charitha Herath flanked by Auditor General W.P.C. Wickramaratne and Secretary to the COPE Nishanthi Wickramasinghe examined the top SLPA management. Ports and Shipping Secretary K.D.S. Ruwanchandra, flanked by Chairman, SLPA Dr. Prasantha Jayamanna, Director J.R.U. de Silva and Chief Financial Officer, Ports and Shipping Ministry Sandhya Pushparani. They were on the first row. Isuru Balpatabendi, Director sat in between Chairman, Jaya Container Terminal Attorney-at-Law Lakmal Ratnayake, and its Managing Director Upul Jayatissa. Director General Customs Maj. Gen. (ret.) G.V. Ravipriya also sat on the second row as a Director of the cash cow.

The COPE didn’t raise any queries from Isuru Balpatabendi nor did he offer any explanations. Balapatabendi’s presence among the eight-member Board of Directors should be examined taking into consideration of him being the Secretary of the Bar Association of Sri Lanka (BASL). Having offered solutions to overcome the current political, economic and social crisis, the BASL cannot turn a blind eye to continuing waste, corruption, irregularities and mismanagement in the public sector. The SLPA can be a case study for the BASL.

The bottom line is that Sri Lanka is currently in such a desperate situation the US may find the environment conducive for a fresh attempt to force SOFA (Status of Forces Agreement) and MCC (Millennium Challenge Corporation) on Sri Lanka. The US succeeded in securing Sri Lanka’s consent for ACSA (Access and Cross Servicing Agreement) in Aug 2017. Interestingly both Ranil Wickremesinghe and Maithripala Sirisena who approved ACSA that gave US military access to Sri Lanka are now with President Gotabaya Rajapaksa’s government.

Importance of internal audit

At the onset of the COPE proceedings, Prof. Herath sought an explanation as regards the status of the internal audit. Obviously, Chief Internal Auditor, SLPA, Gayani Liyanage responses as well as that of the SLPA Chairman to specific questions didn’t appease Prof. Herath, who asserted that poor internal audit could be one of the reasons for the current issues. Prof. Herath asked the SLPA Chairman not to assign tasks to the 53-strong internal audit unit outside their legitimate duties.

Herath raised several contentious issues with COPE members Patali Champika Ranawaka (PCR), Madura Vithanage, Jagath Pushpakumara, D.V. Chanaka, Eran Wickramaratne and Premanath C. Dolawatta making valuable contributions. PCR was particularly spot on. The former JHU heavyweight dealt firmly and expertly with contentious issues while Vithanage targeted the Finance.

The following are the main points of contention:

(1) The loan obtained from China to build Hambantota port has been removed from all government financial statements. As at Dec 31, 2021, Sri Lanka owed China Rs 165.4 bn (USD 1.89 bn). USD 1.2 bn received from China for 99-year lease of the strategic port hadn’t been utilized to settle the loan. Instead, the USD 1.2 bn had been spent though the COPE was not told of the allocation of USD 1.2 bn. The Treasury now services the loan. Prof. Herath requested Ports and Shipping Ministry Secretary Ruwanchandra to submit a comprehensive report on this matter.

(2) The COPE sought an explanation from the SLPA why the state enterprise failed to market the Hambantota port the way the Chinese did after the finalization of the USD 1.2 bn agreement on the 99-year-lease on the commercially strategic port.

(3) Massive losses suffered as a result of procurement of a stock of oil at a cost of USD 24.3 mn (Rs 8,000 mn) that had to be sold for USD 3.5. COPE questioned Niroshan Siriwardena, Managing Director, Magampura port over the circumstances the outfit unwisely utilized the loan obtained from a bank on the advice of a consultant. COPE recommended the SLPA and the Secretary Ports and Shipping Ministry to take legal measures against the consultant. Proceedings revealed Magampura port operation is nothing but an absolute waste of public funds. The failure on the part of those responsible to take tangible action in this regard stressed.

(4) The inordinate and continuing delay in equipping the ECT (East Container Terminal) thereby giving advantage to the China owned CICT (Colombo International Container Terminal) and SAGT (South Asia Gateway Terminal). The SLPA owned 15 percent each of both CICT and SAGT. The negligence and the failures on the part of those responsible for transformation of the ECT seemed, in a way, deliberate. The parliamentary watchdog questioned the possibility of some interested party purposely undermining the operation. The fault seemed to be at the level of Cabinet of Ministers as well as successive SLPA administrations. The issue of taking delivery of gantry cranes before constructing specific positions they were to be installed shocking and disappointing. The COPE took notice of the fact that such equipment took one and half years to be built after an order was placed. It transpired that the cost of the civil works component was USD 198 mn (65% local currency) and equipment installation cost USD 282 mn. However, the installation has been delayed due to the failure on the part of the SLPA’s state bank to provide the required financing. The shocking revelation that the ECT hadn’t been expanded for five years after the completion of the 400 m stretch is evidence that successive governments failed public expectations. Lawmaker PCR emphasized the pivotal importance of revisiting the ECT project as the ground situation has changed. The MP reminded the SLPA and the COPE of the government’s admission of bankruptcy.

(5) Dispute over the SLPA’s stated profits. The SLPA challenged the Auditor General’s estimate that the state enterprise earned Rs 45 bn in 2021. The SLPA placed annual profits at Rs 62 bn. The COPE also made reference to the SAGT returning to the SLPA in 2019 and the government’s responsibility in that regard.

(6) The loss of revenue as well as foreign shippers’ faith in the SLPA as a result of the strike launched on June 10, 2020.

(7) Construction of Adani Group-led CWIT (Colombo West International Terminal). Comparison of the CICT and the SAGT workforce with that of the SLPA and the sharp difference in the number of the private sector workers and the SLPA. The SLPA seemed a law unto itself with the disclosure that the highly profitable venture operated to a certain extent outside the purview of the Management Services Department though the total number of employees remained well under the stipulated figure 9,900. The COPE stressed the need to ensure that the SLPA under any circumstances didn’t go beyond the stipulated number of workers. The current work force comprised 9,300.

(8) Rohitha Abeygunawardena who served as the Ports and Shipping Minister of President Gotabaya Rajapaksa till April 2020 raised the contentious issue of recruitment beyond the approved cadre. The lawmaker stressed the need to compare the private sector operations and that of the SLPA. The COPE was told that though the total approved cadre hadn’t been exceeded, recruitment has been carried out in an irregular and extremely shoddy manner.

(9) Big question mark over the transfer of just Rs. 600 mn out of 69,686 mn profits (2016-2021) period and the pathetic failure on the part of the Finance Ministry to address the issue.

(10) Absence of a cohesive and efficient system to charge CICT and SAGT for certain services rendered by the SLPA.

(11) Growing overtime Bill with 2021 recording a staggering Rs 5.8 bn in extra payments. Scandalous disclosure some workers earned overtime for 400 hours and unskilled work assistants numbering 1,500 continued to be a heavy burden.

(12) Controversy over so-called collective agreement that ensured salary increase every three years. The COPE stressed the need to have guidelines formulated by the Management Services Department to prevent exploitation of collective agreements as the process threatened financial stability.

The SLPA, in spite of being a profit making state enterprise, remains in an utterly chaotic situation. The SLPA hasn’t been a burden on the taxpayer though the national carrier SriLankan, the CEB and the CPC bled the country dry. But casual examination indicates regardless of the financial status a section of public servants continued to enjoy perks and privileges while the entire country suffered as a result of local and some external factors beyond Sri Lanka’s control.

Wednesday, 22 June 2022

Economic meltdown



S.R. Attygalle (extreme left) before COPFon June 08,2022. Ajith Nivard Cabraal, Dr.PBJ and Prof. W.D. Lakshman look on

House watchdog committees ascertain culpability of FM, Monetary Board

By Shamindra Ferdinando

The Committee on Public Finance (COPF), inquiring into financial meltdown recently, called several former and serving officials to ascertain their culpability as well as that of the institutions they served for the developing crisis.

Among them were former Governors of the Central Bank Prof. W.D. Lakshman (Dec 2019- Sept 2021), and Ajith Nivard Cabraal (Sept 2021-March 2022), Secretary to the President Dr. P.B. Jayasundera (Nov 2019-Dec 2021) and Treasury Secretary S.R. Attygalle (Nov 2019-April 2022), Sanjeeva Jayawardena P.C. (received appointment as a member of the Monetary Board in Feb 2020) and Dr. Ranee Jayamaha (the retired CB Deputy Governor received appointment to the Monetary Board in June 2020). It would be pertinent to mention that Attygalle earlier served a short stint as the Treasury Secretary (Ministry of Finance) between Oct. 31, 2018 and Dec. 18, 2018 during the constitutional coup staged by ex-President Maithripala Sirisena.

The term of office of an appointed member of the Monetary Board is six years and in the event of vacation of office by the appointed member, another person shall be appointed in his or her place to hold the office during the unexpired part of the term of office.

The COPF meeting took place on June 08. Dissident SLPP lawmaker Anura Priyadarshana Yapa chaired the meeting. CBSL Governor Dr. Nandalal Weerasinghe and Finance Secretary Mahinda Siriwardana, too, were present.

Attygalle didn’t mince his words when he squarely blamed the then Prime Minister Mahinda Rajapaksa, who also served as the Finance Minister (Nov 2019 to July 2021) for the controversial fiscal policy that had ruined the country. Attygalle declared that the government implemented the first Cabinet paper, dated Dec 04, 2019 presented by Premier Mahinda Rajapaksa.

The former Treasury Secretary, who also served in the Monetary Board till April this year, challenged the widely held view that abolition of a range of taxes, in line with Mahinda Rajapaksa’s fiscal policies, triggered the crisis. Attygalle asserted that the import restrictions, especially the ban on the importation of vehicles imposed at the onset of the Covid-19 eruption, and the economic contraction, resulted in the meltdown.

The COPF should seek an explanation from Attygalle, himself a former top Central Banker, having last served there as Deputy Governor, regarding the failure on the part of the Finance Ministry and the Monetary Board to review the decision to abolish taxes soon after the Covid-19 eruption. The Finance Ministry banned vehicle imports in March 2020 as part of the overall measures to manage the weak foreign currency reserves. Therefore, the Finance Ministry and the Monetary Board cannot absolve themselves of the blame for failing to take remedial measures.

 The COPF specifically asked whether the Finance Ministry and the Monetary Board officials sought to advise the political leadership of the ground realities against taking such decisions. It emerged that they did nothing. The COPF proceedings revealed that in spite of a rapidly deteriorating financial situation, the Finance Ministry and Monetary Board mandarins failed to take remedial measures. The SLPP members in the COPF, too, should not forget that the change of tax policies had been in line with their 2019 presidential election manifesto ‘Vistas of Prosperity and Splendour’.

A disastrous manifesto

The SLPP made the following proposals:

a- Income tax on productive enterprises will be reduced from 28 to 18 percent.

b- The Economic Service Charge (ESC) and Withholding Tax (WHT) will be scrapped;

c- A simple value added tax of eight percent will be introduced, replacing both the current VAT of 15 percent and the Nation Building Tax (NBT) of two percent;

d- PAYE tax will be scrapped and personal income tax will be subject to a ceiling of 15 percent;

e- A five-year moratorium will be granted on taxes payable by agriculturists and small and medium enterprises;

f- Various taxes that contribute to the inefficiency, irregularities, corruption and lack of transparency of the tax system will be abandoned. Instead a special tax will be introduced for different categories of goods and services;

g- Import tariff on goods competing with domestically produced substitutes will be raised;

h- A simple taxation system will be introduced to cover annual vehicle registrations and charges for relevant annual services, replacing the cumbersome systems that prevail now;

i- Various taxes imposed on religious institutions will be scrapped;

j- A zero VAT scheme will be adopted in the case of businesses providing services to Tourist hotels and tourists, if they purchase over 60% of the food, raw materials, cloths and other consumer items locally;

k- Service charges levied on telephones and Internet will be reduced by 50%;

l- Special promotional schemes will be implemented to encourage foreign investments;

m- A tax-free package will be introduced to promote investment in identified subject areas;

n- A clear and uncomplicated system of taxing will be in place with the use of internet facilities, special software and other technological services;

O- Information Technology (IT) services will be totally free from taxes (Zero Tax), considering said industry as a major force in the national manufacturing process;

p- All the Sri Lankans and Foreigners, who bring Foreign exchange to Sri Lanka through consultancy services, are exempt from income tax.”

Dr. Athulasiri Kumara Samarakoon, Soosaiappu Neavis Morais and Dr. Mahim Mendis in a FR petition filed in terms of Articles 17 and 126 of the Constitution listed the above-mentioned points, in that order, as one of the primary reasons for the current crisis. Among the respondents are Prof. W.D. Lakshman, Ajith Nivard Cabraal, Dr. P.B. Jaysundera and S.R. Atygalle.

All of them earlier appeared before the COPF where the incumbent Governor of the Central Bank Dr. Nandalal Weerasinghe emphasized that officials should never engage in politics and should recognize the difference between them and politicians. Dr. Weerasinghe asserted that officials were duty bound to inform politicians if the decisions taken by the latter were wrong. The outspoken CBSL Chief declared that politicians alone shouldn’t be held accountable for the consequences of such wrong decisions. What Dr. Weerasinghe obviously meant was those who served in key positions at that time, too, were responsible for the current crisis. Dr. Weerasinghe, who had been asked to succeed Ajith Nivard Cabraal, in March, after the former suddenly announced his retirement, told the COPF, the officials’ claim that they had been unaware of the economy was on a wrong path for two years leading to the meltdown was not acceptable. Dr. Weerasinghe also strongly questioned the claim that economic policies had been implemented only on decisions taken by the political leadership.

Lawmakers present participating in the proceedings declared that the political leadership and the officials ignored their concerns as regards the economy raised at different occasions.

Culprits identified

CBSL Governor Dr. Nandalal Weerasinghe before COPE on May 25, 2022. Finance Secretary Mahinda Siriwardana is on Dr. Weerasinghe’s right.

The COPF proceedings should be studied along with revelations made by Dr. Weerasinghe before the COPF and the COPE (Committee on Public Enterprises) on May 24 and May 25, respectively as well as lawmaker Ali Sabry’s shocking declaration on May 02 as regards the origins of the crisis. President’s Counsel Sabry discussed the issue in his capacity as the Finance Minister after having led the government delegation for talks with the IMF.

Appearing before the COPF, Dr. Weerasinghe disclosed that those who had been responsible for preparing budget estimates over the years deliberately deceived even the Parliament by providing unrealistic and inaccurate revenue estimates. The CB Governor explained how such practices further weakened the economy as decisions and allocations were made on the basis of fraudulent estimates.

The whole process had been nothing but a farce. Lawmaker Sabry on May 02 in a live interview with Swarnawahini, and Dr. Weerasinghe on May 25, named those responsible for the current crisis that has ruined the economy with unemployment at an unprecedented high. Sabry alleged that the Secretary to the Treasury, Governor of the Central Bank, and senior economic advisors to the President, misled the Cabinet as regards the economic situation. The National List member revealed how they repeatedly assured that the situation was well under control, in spite of difficulties while expressing confidence that issues could be successfully dealt with.

By the time the Central Bank floated the rupee in March this year even without bothering to inform the Cabinet-of-Ministers of its decision, irreparable damage had already been caused, Sabry said.

The COPF and COPE proceedings and MP Sabry’s interview in which he questioned the role of the Finance Minister have revealed the pathetic situation as regards public finance.

The MP has alleged that those who managed the national economy had prevented the country seeking IMF’s intervention well over a year back. Had President Gotabaya Rajapaksa and the Cabinet-of-Ministers received proper advice, Sri Lanka would not have been in the current predicament, Minister Sabry said.

Dr. Weerasinghe named those who refused to heed IMF warnings when he appeared before COPE on May 25. The role played by Mahinda Rajapaksa, Dr. P.B. Jayasundera and the Cabinet-of-Ministers were discussed during the proceedings with Finance Secretary Mahinda Siriwardana, too, helping to ascertain the environment in which the SLPP leadership operated.

Dr. Weerasinghe went to the extent of naming Dr. PBJ as the one who prevented the government seeking IMF’s intervention.

The Customs, Inland Revenue and the Excise Department responsible for revenue collection are run in a shoddy manner. In spite of the watchdog committees exposing glaring omissions and commissions by them that had caused revenue losses in billions of Rupees over the years, the political leadership hasn’t taken remedial measures. Committee reports paint an extremely bleak picture.

But what could be the most unforgivable sin is then Finance Minister Basil Rajapaksa joking about having himself used the illegal Havala/Undiyal system that completely shut down  several billion dollars that should have legitimately come to Sri Lanka as in past years as remittances from our migratory workers, especially serving in West Asia. Even at the height of the COVID pandemic the country received about six to seven billion dollars from mainly those unappreciated poor Lankan workers slaving in those countries as mainly labourers and housemaids. Such money may not be enough to pay back the country’s USD 50 billion foreign debt. That money, however, would have ensured that the country had the few million dollars to clear a shipment of gas or other necessities, instead of having to beg all over the world.

Unfortunately, the Parliament seems incapable of taking corrective measures. The Parliament should explore the possibility of appointing, a smaller team, comprising members of COPE, COPF and the COPA (Committee on Public Accounts) to recommend remedial measures, including possible criminal prosecution of dual citizen Basil Rajapaksa for his many omissions and commissions, but especially for not applying the full weight of the law against those running the underground money transfer system, that has even robbed the education of our children.

 Keeping the currency steady is the wish of any Finance Minister as otherwise in a country like Sri Lanka dependent on imports for many of its essentials, like milk food, wheat, etc., it would result in basics skyrocketing in price as experienced now and as former Finance Minister Ronnie de Mel also learnt it the hard way after allowing the rupee to devalue almost overnight by over 40 percent in the aftermath of opening up the economy to market forces after the victory of the UNP in 1977 with a staggering 4/5th majority in Parliament. It led to government workers staging a general strike demanding a Rs 10 wage increase, but was ruthlessly crushed by that regime.

A corrupt ministry

The Parliament needs to take tangible measures to restore public faith in the system. The Finance Ministry should be overhauled. Perhaps, the IMF, currently engaged in negotiations with the government, should look into the current system in place. The government can formulate an action plan on the basis of findings and recommendations made by the parliamentary watchdog committees. Perusal of proceedings of these committees reveals that the government hadn’t acted on their findings. The inordinate delay in taking action regarding the mysterious decision to reduce the duty on a kilo of white sugar from Rs 50 to 25 cents on Oct 13, 2020 without passing on its benefit to the people is a case in point as pointed out by the COPF Chairman Anura Priyadarshana Yapa, MP. It, however, cost the cash starved Treasury dearly in billions in lost revenue.

Mahinda Rajapaksa served as the Finance Minister at the time of the issuance of the relevant gazette notification. S.R. Attygalle had been the Finance Secretary. It would be pertinent to ask both MP Mahinda Rajapaksa and Attygalle who recommended the duty reduction.

Actually, the COPF should ask Attygalle to explain the circumstances leading to the issuance of that controversial gazette. As Dr. Weerasinghe pointed out recently the officials cannot absolve themselves of the responsibility for the highly questionable decisions taken by politicians.

Who benefited from the reduction of duty imposed on sugar? In fact, the parliamentary watchdog committees should undertake a comprehensive study. Perhaps, the Finance Ministry role in the Yugadanavi deal can be investigated. Sri Lanka finalized the Yugadanavi transaction with US based New Fortress Energy at midnight on Sept 17, 2021 against the backdrop of Basil Rajapaksa receiving the finance portfolio. The government also brought in retired controversial figure M.M.C. Ferdinando from Australia to assume the leadership at the CEB before making the final move. S.R. Attygalle played a critical role as the Secretary to the Finance Ministry. The SLPP had no qualms in going ahead with the agreement in spite of Vasudeva Nanayakkara, Wimal Weerawansa and Udaya Gammanpila challenging the transfer of 40 percent shares of the power station held by the Treasury among other concessions not fully revealed to the public.

The President’s Media Division (PMD) defended the agreement with the US energy firm. On the invitation of the then Presidential Spokesperson Kingsley Ratnayake, M.M.C. Ferdinando briefed the media of the usefulness of the US investment. It would be pertinent to mention that Ferdinando, who fled the country in the wake of Maithripala Sirisena’s triumph in 2015 returned from Australia after the change of government in Nov 2019. Ferdinando’s 2015, move should be examined against the backdrop of corruption accusations directed at him by civil society activists Rajith Keerthi Tennakoon and Attorney-at-Law Namal Rajapaksa. The lawyer lodged a complaint with the then anti-Corruption Committee Secretariat. There had also been a case in the Fort Magistrate Court regarding the import of coal for Lakvijaya coal-fired power plants at Norochcholai.

In spite of initial public interest, such major cases are often not pursued properly even by those initiating them possibly with ulterior motives. When The Island inquired, lawyer Namal Rajapaksa acknowledged not being aware of the developments of his own case. At the time of the Norochcholai project, Ferdinando had served as the Secretary to the Power Ministry. The unholy alliance between the Finance Ministry and monstrous institutions, such as the CEB, should be investigated and mechanism put in place to protect the public interest.

The controversy over President Gotabaya Rajapaksa’s alleged intervention on behalf of India’s Adani Group at PM Narendra Modi’s persistent request led to Ferdinando’s resignation recently. The disclosure made by Ferdinando at the COPE, his subsequent denial and a letter dated Nov 25, 2021 Ferdinando wrote to the then Treasury Secretary Attygalle exposing the horrific way business of the State is being conducted. Accountability and transparency seem to be the last thing in the minds of political leaders here.

Wednesday, 15 June 2022

How political instability undermined national security



Frequent ‘confrontations’ between the police and anti-government activists cause turmoil. Nishan S. Priyantha captured this scene outside Police Headquarters June 09.

By Shamindra Ferdinando

The Institute of National Security Studies (INSS) recently dealt with the relevance of political stability for national security. Dr. Prathibha Mahanamahewa, and Director/CEO Hector Kobbekaduwa Agrarian Training Institute Malinda Seneviratne, a former colleague of ours at The Island editorial, addressed the issues at hand. Acting Director General of the INSS Rear Admiral Dimuthu Gunawardene, who is also the Director of Communications and Publications of the outfit, moderated the event.

Defence Ministry Media spokesperson Colonel Nalin Herath, in a statement issued on June 09, quoted Dr. Mahanamahewa as having told the gathering that the mismanagement of resources, absence of timely decisions, and corruption, caused political instability. The academic was further quoted as having stressed that political stability would automatically ensure national security. A former Commissioner of the Human Rights Commission asserted that a new Constitution would help maintain political stability.

Political commentator Seneviratne had focused on external threats, primarily the LTTE rump/Tamil Diaspora. Seneviratne had been quite convincing in his arguments. The brief Defence Ministry statement on the event held via zoom on June 07 obviously covered just a fraction of what Dr. Mahanamahewa and Seneviratne had said.

The INSS probably wouldn’t have taken up this particular subject if not for the current economic-political and social crisis that has totally eroded public confidence in the incumbent dispensation. In fact, the public has lost faith in the utterly corrupt entire political party setup with a large segment of the population loudly questioning the dependability of the parliamentary system. The INSS aptly titled the event ‘importance of political stability for national security.’

The INSS can inquire into how the recent Aeroflot drama, at the Bandaranaike International Airport (BIA), undermined Sri Lanka’s relations with Russia, thereby impacting the overall stability. Can Sri Lanka afford to antagonize a friendly UN Security Council member, one of the two who have always stood by us, the other being China, always supportive of Colombo, regardless of the party in power here. If not for their veto power, the West would have bulldozed us into accepting their terms through resolutions at the powerful UN Security Council, especially on so-called war crimes where they have been out to nail our victorious security forces on, for unbelievably defeating LTTE terrorists, in the battlefield, against their wishes.

It would be pertinent to ask whether INSS in any way had inquired into the political, economic and social developments in the run-up to the massive explosion of public anger in late March this year. The intelligence services, too, seemed to have completely ignored the swelling up of public anger over shortage of essential items, including food, and the skyrocketing cost of living, until it was too late.

The INSS should have factored in Speaker Mahinda Yapa Abeywardena’s declaration that the country is fast heading towards an unprecedented famine. PM Wickremesinghe and many others say the same though they do not provide solutions.

Can the current crisis be simply addressed by restoring political stability? What really caused the current and still worsening crisis that has bankrupted the country? The political as well as the military leadership should realize political stability achieved by a near 2/3 majority in Parliament in the wake of an overwhelming triumph for the same party at the presidential election contributed to the catastrophe. That is the undeniable truth.

Having secured the Nov 2019 presidential election with an overpowering majority, the SLPP won a commanding 145 seats in the 220-member Parliament at the Aug 2020 parliamentary election. The Colombo Port City Economic Commission Bill received 149 votes in May 2021. Seven months before, the 20th Amendment to the Constitution received a staggering 156 votes. The SLPP acted as it didn’t expect any trouble. The electorate was repeatedly told the 20th Amendment would ensure political stability while the passage of the Colombo Port City Commission Bill would attract the required foreign direct investments.

The arrogant and over confident SLPP leadership ignored warning signals. Perhaps the government could have managed to sustain the national economy if the Covid-19 pandemic didn’t almost totally disrupt the tourism sector, with the crippling of international travel, and also caused a sharp drop in foreign remittances, with a large number Sri Lankan migrant workers having to return home. Even those who retained their jobs in West Asia often got their wages reduced or got them after delays. Things were further compounded by the government having to repatriate workers and having to spend valuable foreign exchange to procure vaccines and other related pharmaceuticals.

Now, adding to the country’s woes, is the fallout from Russia’s incursion into Ukraine and the US rather foolishly using that to blead Kremlin to death. That is already endangering world food security and disrupting the supply of other essentials, like oil, coal etc., while also causing record inflation worldwide.

Still, the government could have successfully addressed the growing threat if it responded positively to a warning issued by the International Monetary Fund (IMF) in early 2020. But, the Cabinet of Ministers, chaired by President Gotabaya Rajapaksa, turned a blind eye to the IMF call for an immediate debt restructuring programme. The IMF response was to Sri Lanka’s request for a Rapid Financing Instrument (RFI) made in early 2020. The outspoken Governor of the Central Bank Dr. Nandalal Weerasinghe is now on record as having told the Committee on Public Enterprises (COPE) that Dr. P.B. Jayasundera, the then Secretary to the President, finally decided against the IMF’s intervention.

Who should accept the blame for the current crisis? Would it be fair to hold Dr. PBJ accountable for an utterly irresponsible course of action that has caused immense political instability?

Basil on IMF

Having given up the SLPP National List slot and the finance portfolio, SLPP founder Basil Rajapaksa addressed the media at the Nelum Mawatha party office. The revelation made by Basil Rajapaksa, perhaps unwittingly, showed the SLPP had addressed the economic crisis. At the time, the IMF advised Sri Lanka to undertake a debt restructuring programme and drop plans to grant massive tax cuts, while Premier Mahinda Rajapaksa held the finance portfolio. Basil Rajapaksa, who took over finance in July 2021, in response to a media query last week explained how the IMF divided the government. According to him, when Indian Finance Minister Nirmala Sitharaman raised the issue, Basil Rajapaksa, turning towards the then Finance Secretary S.R. Attygalle has said that he was among those who opposed seeking IMF intervention. Basil Rajapaksa has pointed out that Sri Lanka’s High Commissioner in New Delhi Milinda Moragoda favoured the move.

The government played in what could aptly be termed in local parlance as pandu with the national economy. By the time Basil Rajapaksa took over the Finance Ministry, in July 2021, irreparable damage had been done and the finalization of the Yugadanavi deal, two months later, divided the SLPP. The SLPP and a minority in the CEB hierarchy wielding power, defended the controversial deal struck at midnight to the hilt. CEB Chairman M.C. Ferdinando, on the invitation of the then presidential spokesman Kingsley Ratnayake, sought to paint a rosy picture at a media briefing arranged at the Presidential Media Division (PMD). Kingsley Ratnayake, formerly of Sirasa, has quietly left the PMD. Ratnayake has left the country at the onset of a public protest campaign and is believed to be in Australia. Sudewa Hettiarachchi, who joined the PMD as its Director General, remains as the government continues to struggle on the media front.

The explosion of public anger whether pre-planned or not, at the approaches to President Gotabaya Rajapaksa’s private residence at Pengiriwatte, Mihihana, on March 31, 2022, should be investigated, taking into consideration the following factors: (1) dismissal of IMF’s advice on the need to go for an immediate debt restructuring programme, the need to drop plans to implement massive tax cuts and fixing the Rupee rate at 203 at the expense of the overall economy (2) ruination of the agriculture sector as a result of unilateral and abrupt decision taken by President Gotabaya Rajapaksa to ban chemical fertiliser and agro chemicals. The unprecedented move resulted in the decimation of the country’s agriculture output (3) Causing irreparable damage to Sri Lanka’s diplomatic ties with Japan by cancelling already agreed projects, including a light trail venture, a strategic foreign policy blunder (4) explosions of domestic gas cylinders caused by change of the formula by foreign suppliers possibly done deliberately to further worsen the situation here (5) disputed Yugadanavi deal. The agreement with the US energy firm divided the SLPP, with three ministers challenging the move in court along with many others (6) turning a blind eye to waste, corruption, irregularities and mismanagement (7) failure on the part of the government to discipline revenue collection setup, comprising the Inland Revenue Department, Customs and Excise Department and turning a blind eye to illegal money transferring methods, such as Hawala and Undiyal.

Then Finance Minister Basil Rajapaksa, in an interview with Shyam Nuwan Ganewatta of Divaina, foolishly declared his faith in illegal methods, little realizing that it was depriving the country of its precious foreign exchange (8) the continuing dispute over the handling of the 2019 Easter Sunday massacre by Muslim extremists (9) pathetic response to accountability accusations pertaining to Sri Lanka’s triumph over Tamil terrorism.

Can Basil Rajapaksa’s departure from Parliament or business tycoon Dhammika Perera’s entry in his place give overnight boost to a failed economy? Having promised a system change, the SLPP has lost its way and brought in Ranil Wickremesinghe, accused of being the alleged mastermind of the Treasury bond scams by the then Joint Opposition, and Perera, embroiled in tax issues, to manage the political and economic fronts.

Perhaps, INSS should seriously consider receiving a briefing from heads of parliamentary watchdogs, the Committee on Public Enterprises (chaired by Prof. Charitha Herath, MP), Committee on Public Finance (Anura Priyadarshana Yapa, MP) and Committee on Public Accounts (Prof. Tissa Vitharana) regarding the threat posed to political stability and national security by unbridled public and private sector corruption.

The COPE probing into the CBSL and the Finance Ministry appearance before the watchdog by its former members of the Monetary Board comprising Prof. W.D. Lakshman (Dec 2019-Sept 2021/Ajith Nivard Cabraal (Sept 2021-March 2022), Treasury Secretary S.R. Attygalle and nominated members Sanjeeva Jayawardena, PC, Dr. Ranee Jayamaha and Samantha Kumarasinghe caused the current crisis. In addition to the Monetary Board, the then Premier Mahinda Rajapaksa, who served as the Finance Minister (Dec 2019-July 2021) and Dr. P.B. Jayasundera, too, are accountable, with the latter being blamed for blocking the government securing IMF intervention.

Probe on security flop

Sri Lanka witnessed what can be described as a countrywide breakdown of law and order on May 09, following the SLPP goon attack on the Galle Face public protest, demanding the resignation of President Gotabaya Rajapaksa and the entire Cabinet of Ministers, including Premier Mahinda Rajapaksa.

The month-long campaign had the backing of both external and internal forces hell-bent on a system change. The security forces, as well as the police, failure to prevent it as well as the meticulously organized military type retaliation, should be discussed against the backdrop of the Rambukkana shooting where a person died and two dozen others were wounded.

No one bothered to point out that the police opened fire nearly 15 hours after those protesting against fuel price hike blocked main roads as well as the Rambukkana railway line for 15 hours. Can protesting public block roads thereby inconvenience other ordinary people? And police resorted to use lethal force only after protesters turned violent and nearly blew up a petrol bowser by setting fire to it.

Unfortunately, the rapid deterioration of the economy against the backdrop of the government acknowledging insolvency has given an opportunity to various interested parties to undermine the rule of law. The continuing blockade on the Presidential Secretariat situated at Galle Face signifies a pathetic state of affairs. Dr. Nalaka Godahewa, who held the media portfolio at the time of the May 09 violence, raised the disgraceful failure on the part of the government to thwart organized attacks on a selected group of ruling party lawmakers, numbering over 70. The Gampaha District MP, whose Gampaha home suffered heavy damage, drew the attention of both President Gotabaya Rajapaksa and Premier Ranil Wickremesinghe to the crisis, while warning of a 1987-1990 type insurgent campaign.

Obviously, the incumbent political leadership is furious with the military for not stepping in immediately. They are of the view that retaliatory attacks could have been thwarted if the military acted swiftly and decisively. Naturally, some have found fault with the then Commander of the Army General Shavendra Silva, who also functioned as the Chief of Defence Staff (CDS). The appointment of a three-member committee headed by Admiral of the Fleet (retd.) Wasantha Karannagoda to inquire into the lapses on the part of the military should be viewed in the context of a volatile political-economic-social environment.

Could military intervention have saved Mahinda Rajapaksa’s premiership even at the expense of bloodshed? Had there been a large-scale military response to countrywide retaliatory attacks, the country would have been in a much bigger crisis today. There cannot be any dispute over that. No one would have desired Rathupaswela type incident at a time the government was pleading before the international community for food assistance. The incident in the first week of August 2013 shocked the country. It brought shame on the war-winning Army, though it too was instigated by mysterious forces.

In fact at the onset of the trouble, Gen. Silva, the celebrated GoC of the 58 Division, assured Colombo-based defence attaches that the military wouldn’t intervene. Had that happened, it would have definitely helped those who had been campaigning for the ouster of the Rajapaksas.

The Army earned the wrath of the public for opening fire on people demanding clean water at Rathupaswela. Three died in indiscriminate shooting. It would be pertinent to mention that the public had been protesting against the Dipped Products factory over the alleged releasing of chemicals into the environment. The villagers had been seriously concerned about their water supply for some time as they were dependent on groundwater. Their complaints had fallen on deaf ears. Obviously, those in authority hadn’t been interested at all in inquiring into the issue at hand.

Had they bothered to conduct an investigation in a timely and transparent manner, the accusations could have been ascertained and remedial measures taken. Then, why was it not done? Well, one cannot help but think that it is because the factory is owned by Hayleys controlled by Dhammika Perera, the latest entrant into parliamentary politics. In a way, Perera’s entry into active politics can be compared with Gotabaya Rajapaksa entering national politics at the highest level against the backdrop of widespread criticism of all members of Parliament.

Secretary to the Public Administration Ministry Attorney-at-Law Priyantha Mayadunne recently explained how the political party system ruined the country. Mayadunne didn’t hesitate to declare that the mother of all problems is the oversized public service that has been an unbearable burden on the national economy for a long time. One-time Justice Ministry Secretary Mayadunne asserted that Sri Lanka can manage with half a million strong public service though the actual figure is 1.5 mn. Isn’t it a destabilizing factor? If the INSS is really keen to ascertain the truth, it may undertake a thorough examination of destabilizing factors as the country slips further into foreign debt.

The economic crisis, as explained by Governor of the CBSL Dr. Nandalal Weerasinghe, is so acute today, Sri Lanka is vulnerable to external machinations. The external threats can be quite deadly as those directly involved in the decision, making process here, too, have been part of various such anti-national projects. Yugadanavi deal can be cited as just one such example.