Sri Lanka: How did it all go so wrong?

How did it all go so wrong? The reason is simple. The Prime Minister wished to manage the country in an inclusive and pragmatic manner. His actions in practice have been highly divisive and deeply flawed.

by S. Navaratne- Dec 30, 2017

( December 30, 2017, Colombo, Sri Lanka Guardian) When Ranil Wickremesinghe was appointed Prime Minister in January 2015 the perception was that he would lead the country in an inclusive manner towards restoring good governance and its values and institutions. It was thought there would be no bribery and corruption; we would have free press, free association, free elections, the rule of law as understood in the West, independence of the judiciary, and public service integrity and a solution would be found to the longstanding Tamil problem in close collaboration with the Tamil bourgeoisie living locally and abroad that would be acceptable to the majority community. Most of all, the new government was expected to transform the economy by adopting free market economics, ensuring the inflow of large scale foreign direct investment to boost economic growth and raise continuously the standard of living of the population.

The omens were good with all major parties onside to create an inclusive one nation society with a sense of shared values and interests. Three years have now passed since the Prime Minister assumed office. There have been some positives and pluses. Yet, it is no exaggeration to say the hopes we pinned on the Prime Minister have turned into illusions. For many people optimism has turned into disappointment, discontent and dissent. Much worse, politico-religious fanaticism has raised its head and more may be lying in wait.

How did it all go so wrong? The reason is simple. The Prime Minister wished to manage the country in an inclusive and pragmatic manner. His actions in practice have been highly divisive and deeply flawed. The Sinhala population (primarily the Sinhala Buddhists) today is more divided, more polarized, and more aggressively politicized than ever before.

Divisive actions of the government that were inimical to develop and sustain national consensus for the clear-cut national purpose envisaged by the Prime Minister are legion. Five choices made stand out.

First, and a very damaging own goal, was allowing justified perception that the Prime Minister, though Mr. Clean himself, turned a Nelsonian eye to corruption. The bond scams are the most visible example. There are others (such as the award of tenders) that cannot be denied. Additionally, many governance issues such as subverting parliamentary procedures to postpone elections have undermined the people`s perception of the Government`s good faith.

Second was the effort to crush the Rajapaksas politically. Listening to the songs of sirens having a visceral hatred of the Rajapaksas primarily for having annihilated the LTTE, the Rajapaksas have been pilloried without evidence for robbing the country of billions of dollars. The intensity of the animus against the Rajapaksas has had no limits. Various institutional mechanisms such as PRECIFAC were established to harass, hound and punish the Rajapaksas and their allies for alleged misdemeanors. Western governments and agencies too were mobilized to nail the Rajapaksas. It has outraged many in the country, especially rural soldiers and policemen and their kith and kin, ever grateful that the Rajapaksas decisively defeated the LTTE.

Common sense would have suggested that Mahinda Rajapaksa, who won a majority of Sinhala and Buddhist votes at the Presidential Election, was part of the solution to implement the Prime Minister`s vision to bring about good governance, peace and prosperity, especially with regard to the Tamil issue. All that was required was to let the widely perceived misdemeanors of the Rajapaksas, particularly in respect of bribery and corruption, be dealt with by a strengthened legal system, the rule of law and the jurisdiction of the Courts of law. Politically, Mahinda Rajapaksa with his mass following should have been treated as a worthy opponent to be consulted on national issues, and not an enemy to be given short shrift.

Third, were the highly divisive economic policies pursued by the government. These resulted in:

(i) The sharp rise in wealth inequality to unprecedented levels. The wealth gap between the “haves” and the “have-nots” is now much worse than during the Rajapaksa era. It has given rise to alarming economic and social disparities. The opportunity for economic mobility is disproportionately in favour of the affluent classes.

(ii) The relentless rise in the cost of living (the latest over 8% annually) much faster, and much higher annually than in the Rajapaksa era to the detriment of low and lower middle income groups.

(iii) Economic development skewed more than ever before in favour of the affluent. It stemmed from the unbridled large flows of credit from financial institutions for the building and purchase of luxury apartments, luxury hotels and luxury imports, notably of vehicles. Land prices have rocketed sky high. Lending to financially less attractive production-oriented sectors of the economy has been constrained. So too investment in projects of benefit to middle and low income groups such as low cost housing, agriculture and transport.

What a difference to the task of unifying the country, if the Government had pursued a policy of austerity populism for a purpose, that of achieving the Prime Minister`s vision for 2025.

All that was necessary for the success of austerity populism was to keep the Yahalapana economic promises made in the 100 days Progamme frozen for two years, and then delivered to the letter.

The benefits would have included:

(i) Public servants would all have had a nest egg of Rs. 250,000 (Rs 10,000 a month plus interest) in two years.

(ii) A hundred billion rupees and more accruing to the Treasury in two years (2015-2016) if petroleum and utility prices were kept at Rajapaksa era levels. It would have resulted in the government budget deficit plummeting, inflationary printing of money minimized and interest rates low.

(iii) Soft curbs and controls of lending by the banking and financial sector for luxury investment and consumption goods, would have prevented the turbo boost in luxury imports in 2015.

(iv) Several billion dollars would have been added to the foreign exchange reserves of the country. The collapse of oil prices alone in 2015 amounted to over well over $2 billion of savings, if not for the misguided Government policies boosting imports. Likewise, an inflow of $1.5 billion to the foreign reserves for the Port City project in 2015/2016, had it not been halted temporarily. Moreover, foreign reserves would have benefitted from no exit of foreign money of $1 billion from the bond and stock market; and no fall in FDI s in 2015-2017 compared with 2014. Both outcomes occurred because of the lack of market confidence.

(v) No excess demand, no slide in the exchange rate, no increases in the cost of living, no uptick in wages and inflation, no stock market in the doldrums, no anaemic economic growth.

(v) Repayment, without difficulty, of capital and interest of all immediate and prospective Rajapaksa era foreign loans incurred for development projects.

(vi) A “Master Plan” in detail to fast track implementation from 2017 onwards of the Prime Minister`s Vision 2025 and beyond.

Fourth was the co-sponsoring with the West of a far reaching Resolution (30/1) at the Human Rights Council, supposedly to heal the wounds of war and to promote reconciliation among all communities. It opened the flood gates for Western (and UN officials) interference in the internal affairs of the country. Logic demanded that the Prime Minister should have resisted the unwarranted Western demands on the wording and provisions contained in the Resolution. The highly divisive Resolution diminishes the prospects of reconciliation. It is un-implementable as it lacks legitimacy in the absence of approval by the Cabinet, Parliament, President or the voters.

Reconciliation is not the issue. All communities in Sri Lanka recognize that reconciliation of the Tamils and the rest of the population is essential. Reconciliation, however, one must first deal with improving the “condition of people” living in war-ravaged areas through relief, rehabilitation and reconstruction of war torn areas. Western and UN pressure on the government to fulfil its commitments relating to Resolution (30/1) does not do that. Loads of money ($1 billion and more) do. Sadly, the West has poured plenty of honeyed words at every turn on reconciliation, but has given no money worthy of mention to do just that.

The fifth was the Prime Minister`s whole approach to resolve the Tamil issue. He has stuck to his long-held views in favour of granting devolution on federal lines. The attempt to do that in the designing of a new Constitution has galvanized even Buddhist monks, from the top hierarchy down, to oppose the proposed Constitution. It is perhaps the tipping point where the Government wishes have gone too far.

What was required to resolve the Ceylon Tamil issue was the above mentioned “Marshall Plan” for people-oriented benefits in the areas badly damaged by the LTTE conflict; integrating the country as a whole by fairness in the composition of the Cabinet of Ministers at the Centre, and in public employment of minorities at every level of administration in proportion to their number in the population; and reaching out to Mahinda Rajapaksa and the Joint Opposition to go beyond the 13A in power sharing, in a consensual and incremental manner by amending the current Constitution.

Why the Prime Minister adopted deeply divisive policies when his intentions were the opposite are not known. Perhaps, he belongs to the breed of politicians who believe in taking unpopular positions on issues, sticking to their guns if needs be in the teeth of any political storms, winning popular respect and thereby boosting political energy for their set of reforms.

What happens next? It all depends on the outcome of the local government elections. If the UNP wins a majority of Sinhala Buddhist votes there will be no holding back the Prime Minister. On the cards are large scale selling of the “family silver” including financial institutions, ports, airports, agricultural lands to foreigners to pay off the Rajapaksa debts and to shrink the size of the state; accommodating TNA demands to lock-in 100% of the Tamil vote for the Prime Minister at the next Presidential election; caving in to Western pressures on Resolution 30 (1) et al that are detrimental to the country`s sovereignty; extensive market liberalization regardless of short term costs to the economy; and corruption Yahapalanaya style.

On the other hand, if the SLPP trounces the UNP in the battle for the Sinhala Buddhist vote, the roll-up of the Yahapalanaya maps is on the cards. Sooner than later the Prime Minister too will meet his Waterloo. The last candle will be extinguished of the well bred, well read, well heeled, anglicized, urban politicians of the past. We will not see the likes of him in politics again.