Opinion

IMF may have changed, but Sri Lanka has not

Published

2 years ago

2022/09/8

The IMF has told us in no uncertain terms that corruption and waste have to be brought under control. Yet, a minister would directly solicit a bribe from a Japanese company and get away with it. Doesn’t the Cabinet have any control over officials who change the conditions in the tender, and decide to buy coal for two years with no thought for the price fluctuations.Although the IMF, the Paris Club, the US, the UK, Europe, China and Japan have all got together to help us. Do we deserve their help? The corrupt system needs a shake-up.

The IMF was formed in 1945 at the Bretton Woods Conference based on the ideas of Dexter White and John Maynard Keynes. At the beginning it had 29 members. The objective was to expedite the economic development of underdeveloped countries. It focused on three areas – policy development, financial assistance and capacity development. The funds came mainly from the US, western countries and Japan. Keynesian policies, which did not discourage welfarism and government intervention in economic policies, initially benefited many developing countries and also the poor in rich countries. From the end of World War II to about the early 70s, these policies were not harmful to the global poor.

In the 70s Margaret Thatcher came to power in Britain and Ronald Reagan in the US. They were of the opinion that welfarism and government role were an impediment to economic development. The basis of neo-liberalism is the idea that the market is the prime determinant of not only prices of goods, and matters related to trade and commerce, but also social characters and human values. This means there is no need for the government to intervene on behalf of the people, and market forces most efficiently guide the economy with benefits to all stakeholders. This theory was first mooted by Friedrich von Hayek, and it was more or less a refutation of welfare capitalism advocated by John Maynard Keynes, which had been in practice since the end of Word War II in 1945. Hayek advised Margaret Thatcher on the virtues of neo-liberal economic policies, and those were subsequently adopted during Reagan’s time in the US and Margaret Thatcher’s in the UK.

These policies virtually detached the government from economic management. During the era of welfare capitalism and Keynesianism, which existed from the late 40s to the early 70s, the governments in the western countries adopted measures to protect the ordinary people from the depredations of market forces. Reagan and Thatcher, however, viewed those policies as an impediment to economic development. They believed that unrestrained market forces were a better driver of the economy. Thus were born neo-liberalism and its offshoot globalisation, which was designed to force the rest of the world to fall in line and accept their open-borders, export-led growth policy. The IMF, WTO and the World Bank were reoriented to serve this purpose.

These neo-liberal policies prevailed until the outbreak of the international debt crisis in 1982. In the latter half of the 1970s, developing countries borrowed heavily to pay for increasingly costly oil imports and to finance ambitious investment projects, many of which turned out to be white elephants. The IMF traced their problems to poor policies, unproductive borrowing, and incomplete programme implementation. In disbursing funds, the IMF became more selective about the recipients of concessional support, and required stricter and more extensive conditionality.

The 1980s the world learnt that a programme was unlikely to succeed if the impact of economic reforms on the poor—and resulting social unrest and opposition—was not addressed. This prompted the IMF to focus its help not only on poor countries, but also on the poor within countries. Analysis of poverty issues in Policy Framework Papers became a standard part of programme negotiations. Programmes continued to emphasise fiscal consolidation as a prerequisite for macroeconomic stability, but there were growing pledges to strengthen social spending, especially for health and education.

In the meantime, however, many low-income countries faced the problem of debt accumulation beyond their repaying capacity. In 1996, the IMF and the World Bank developed the Heavily Indebted Poor Country (HIPC) initiative, under which low-income countries with multi-year track records of good policies, would qualify for grants in association with their concessional loans.

The HIPC initiative soon came under heavy criticism for “offering too little relief too slowly to too few,” with only four countries obtaining a full stock of available debt relief before the end of the century. In 1999, the Bretton Woods institutions “enhanced” the initiative, by lowering the bar for judging whether debt was unsustainable, and providing debt relief and grants sooner to qualifying countries. Within three years, enhanced HIPC could deliver almost US$1 billion in debt relief to 25 countries.

By the turn of the century, the IMF’s engagement with low-income countries centered on three pillars: better funded and designed programmes, debt relief to facilitate poverty reduction efforts, and technical assistance. Although the IMF had long offered technical assistance to its members, the focus shifted to African countries, which by the early 2000s were receiving more than one-quarter of the IMF’s technical assistance. These efforts paid rich dividends. By 2019, 36 out of 39 eligible countries had received debt relief totaling some $125 billion, allowing them to increase social spending, especially on health and education, while remaining within budgetary envelopes. While most did not fully achieve their UN Millennium Development Goals, many made substantial progress.

Sri Lanka, to begin with, was better in terms of economic development than the African countries. It achieved middle income status. From 2010 to 2015 it recorded the highest GDP growth in South Asia, and was well on the way to prosperity. But the economy was like a wounded animal, burdened with so many unproductive projects and huge unsustainable debts. We were living beyond our means. Consumerism and aggrandizement became the order of the day. Few blunders by the government in 2020 and 2021 made the economy go bankrupt.

Apart from living beyond means, corruption, bribery, mismanagement and waste ate in to the vitals of the country. Yahapalana committed the Treasury bond scams. Then came the sugar scam under the new regime. And the most recent coal scam. Nether politicians nor bureaucrats have changed!

N.A.de S. AMARATUNGA

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Opinion

Is AKD following LKY?

Published

2 days ago

2024/12/20

Thilina Walpola

by Chula Goonasekera
Rev. Dato’ (Sir) Sumana Siri

We, the citizens of Sri Lanka, have already witnessed significant reforms in governance under AKD’s leadership. This personally led process must continue consistently, free of bias, and within the framework of the law to ensure sustainable governance by the State, not the individual. Such efforts will help minimise the waste of public funds and lay a strong foundation for the nation’s development in the long term. We often look to Lee Kuan Yew (LKY), Singapore’s founding father, as an example of transformative leadership. He united three diverse ethnic groups—Chinese, Malay, and Indian—under the principle of honesty. Today, Sri Lanka faces profound challenges from past political corruption, economic instability, and social divisions. LKY’s leadership serves as a reminder that integrity, accountability, and a commitment to the greater good can redefine a nation’s destiny, regardless of its size or resources, similar to Singapore.

When Singapore gained independence in 1965, it was a small, resource-scarce nation facing political unrest and ethnic divisions. Yet, within one generation, it became a global financial hub and a first-world country. LKY’s leadership was pivotal, centred on three core principles: meritocracy, integrity, and pragmatic governance. He prioritised national security, social cohesion, and economic growth. His efforts to foster ethnic harmony included implementing bilingual education policies and enforcing anti-discrimination laws. Similarly, AKD should consider enacting legislation to prevent racially motivated demands, i.e. anti-discrimination laws, to safeguard the government from evil, selfish minds trying to destabilise the government’s commitment to equality. Such legislation will stop this burden falling on the leadership case by case.

LKY’s policies, though sometimes harsh, were rooted in practicality and long-term thinking. The Internal Security Act ensured peace and stability during critical years. Likewise, his investments in education and infrastructure established a foundation for sustained growth. His focus on political stability, a robust legal system, and zero tolerance for corruption inspired investor confidence. Singapore’s Corrupt Practices Investigation Bureau (CPIB) was empowered to tackle corruption at all levels. Sri Lanka must adopt a similar mindset to revitalise the Bribery and Corruption Commission, moving away from populism and short-term fixes in favour of strategic, future-oriented policies.

AKD’s primary election theme was anti-corruption, reflecting a key aspect of LKY’s leadership. His unwavering stance against corruption defined LKY’s pragmatic governance. He held public officials to the highest accountability standards, ensuring that anyone guilty of corruption faced severe consequences, including dismissal, public exposure, and prosecution. By rooting out corruption, Singapore built domestic credibility and attracted global investment. We in Sri Lanka need such legislation at the earliest opportunity to deal with various kinds of corruption that are appearing again and involving many public officials.

In Sri Lanka, corruption has long undermined public trust in institutions and stifled economic growth. With overwhelming public support, AKD is well-positioned to deliver on his promise to combat corruption. However, this needs to be done early before the government gets entangled with controversy over its own ‘tiered’ standards. Through comprehensive legislative measures, Sri Lanka can rebuild its institutions, restore public confidence, and chart a course toward sustainable development.

LKY was considered “cruel” by some because he treated all races equally without favouring any. AKD shares a similar stance. One of the hallmarks of LKY’s leadership was his unwavering commitment to meritocracy. This created a culture of excellence where the best and brightest minds were responsible for leading the country. In Singapore, recruitment and promotions across all sectors were strictly based on merit—capabilities, skill sets, and abilities—not on connections, nepotism, racial considerations, or personal favouritism. Although challenging to implement, meritocracy can be implemented with the open advertisement of qualifications needed, a transparent appointment process, strict job plans with annual reviews linked to customer feedback, and personal development strategies that are considered a necessity to continue. This approach will foster a culture of excellence and innovation, like Singapore, ensuring that the most capable individuals propel the country forward.

Sri Lanka must break free from the grip of favouritism and focus on nurturing talent through equal opportunities for all citizens, regardless of ethnicity or social background. Early signs of this approach are visible under AKD’s leadership. LKY understood that for a nation to progress, its institutions must be led by those who are truly capable, irrespective of their background. By adopting meritocracy, Sri Lanka could break the cycle of favouritism, nepotism, and ethnic division that has often hindered its development. Establishing a system where opportunities are based on ability and performance could unlock the full potential of Sri Lanka’s people, fostering a culture of innovation, growth, and national unity.

After gaining independence in 1965, during Singapore’s formative years, LKY focused on eliminating corruption, gang activities, and communist threats to create a peaceful and secure nation. The Internal Security Act (ISA) granted his administration discretionary powers to arrest and detain individuals without trial, when necessary, to prevent actions deemed harmful to Singapore’s security, public order, or essential services.

The ISA allowed preventive detention, suppression of subversion, and countering of organised violence against persons and property. Sri Lanka urgently needs a similar act to ensure that politicians and public officials comply with legally binding measures. With its Parliament still in its formative stages, we hope Sri Lanka will soon establish a comparable Internal Security Act. By eliminating corruption at all levels, as LKY did, Sri Lanka can inspire public trust and attract international investors who view stability and a corruption-free environment as prerequisites for investment. This approach could transform Sri Lanka into a manufacturing, business, and financial hub for the Indian Ocean region.

Under LKY’s leadership—often described as strict—Singapore transformed from a third-world nation into a first-world country. Sri Lanka has the potential to achieve even more, given its abundant natural resources, strategic location, and educated population that can be developed into a skilled workforce. With its prime position in the Indian Ocean, Sri Lanka could become a regional economic powerhouse—provided it fosters a stable and investor-friendly environment. Like Singapore, Sri Lanka should adhere to a non-aligned foreign policy to emerge as a crucial node in global trade and finance, maintaining friendly ties with Eastern, Western, and Asian powers while leveraging its strategic location.

While some label LKY’s methods as “cruel,” his leadership was not about oppression but discipline and fairness. Whether these policies were “cruel” or benevolent is debatable, but their results speak for themselves. He treated all races equally, fostering harmony in a diverse society by ensuring everyone felt they had a stake in Singapore’s future. Moreover, LKY’s economic policies were marked by simplicity and foresight. Low personal income taxes, the absence of capital gains and inheritance taxes, and a business-friendly environment encouraged reinvestment and entrepreneurship. By positioning Singapore as a global trade and financial hub, LKY ensured its economic resilience. Sri Lanka, too, must prioritise national unity. Divisive politics and ethnic biases must be curtailed to build a shared vision of prosperity and peace, as AKD is striving to do.

LKY’s leadership was built on three core tenets relevant to Sri Lanka today: meritocracy, integrity, and pragmatism. Encouragingly, AKD appears to be moving in a similar direction. One of LKY’s greatest strengths was his pragmatic, long-term approach to governance. He maintained tight control over domestic finances, preventing the internationalisation of the Singapore dollar and limiting the operations of foreign banks. This created an environment that attracted international firms eager to establish themselves in Singapore. Sound financial policies, a corruption-free environment, and a focus on technological advancement helped Singapore become a hub for multinational companies like General Electric. State-owned enterprises like Temasek Holdings and Singapore Airlines were run with business efficiency, often outperforming private sector competitors. Sri Lanka could adopt a similar model to enhance the performance of its state-owned enterprises and boost economic growth.

Singapore adopted a two-pronged financial strategy: becoming an international financial hub while ensuring its financial sector supported key domestic industries like manufacturing and shipping. Additionally, integrating foreign and local talent fuelled decades of sustained economic growth. LKY’s focus on economic development, making Singapore an attractive investment destination, and drawing world-class manpower offer valuable lessons for Sri Lanka.

To replicate such success, Sri Lanka must invest in state-of-the-art infrastructure, establish excellent air and sea linkages, and maintain a low and transparent tax regime.

Clean and efficient bureaucracy, a strong regulatory and legal framework, and a neutral diplomatic policy—balancing relations with global powers like the US and China—are critical. Developing clean, green cities powered by sustainable energy will also be key to achieving remarkable economic success akin to Singapore’s.

Opinion

‘A degree is not a title’ – a response

Published

2 days ago

2024/12/20

Thilina Walpola

Reference the above-captioned letter in The Island of 16 Decembe, its writer, Philosophiae Doctor (PD), he is incorrect in his analysis of a Ph. D degree as a title. As Dr. Upul Wijewardena has said, only a Ph. D holder who can use the title ‘Dr’. However, the tradition is for those who have a medical degree to be called Dr. PD has written about the history of universities and quoted chapter and verse about the origin of degrees. We are now in the twenty first century and most universities have their own system of awarding Ph. Ds. For instance, British universities award Ph. Ds based on 100 per cent research whereas in American universities Ph. D degrees are awarded on the basis of 50 per cent research and 50 per cent course work. The research degree is given more weight at interviews.

PD has also said that a Masters’ Degree (MA) is essential to teach in a university. Many universities including universities in Sri Lanka offer Assistant Lecturer positions to those who have first degrees with classes. Some time ago, the Dean of the faculty of Arts at Otago university, New Zealand had only a B.A. He was appointed Professor because of his publications. In American universities lecturers with a Ph. D are addressed as Assistant Professor. Then a Professor after retirement has to get permission from his university to use the title as Professor (Emeritus). There is no such requirement for a person with a Ph. D to use the title Dr. Modern universities do not follow procedures that were adopted in old Europe mentioned by PD.

Dr. P. A. Samaraweera

Opinion

Electricity tariffs cannot be reduced due to CEB Mafia

Published

2 days ago

2024/12/20

Thilina Walpola

Ceylon Electricity Board (CEB) has apparently become a law unto itself; it is increasing the salaries and other perks for senior staff at their will. There are 26,131 employees of CEB and its monthly salary bill is around Rs. 3,000 million, out of which 600 million goes for the salaries of engineers. A special grade engineer’s monthly take-home salary is reportedly about Rs. 919, 432 while an E1 grade engineer draws around Rs. 694,240 a month. These include a vehicle allowance of Rs. 250,000 and other benefits. The CEB has thought it is fit to regularly increase the salaries at the insistence of the powerful engineers’ union every three years without getting the approval of the cabinet or the public accounts committee of the finance ministry.

Out of the total number of employees at least 50% are political appointees recrutied by successive ministers of the power and energy ministry. Even the salary of a meter reader is Rs. 54,420 and it comes to around Rs. 125,000 a month. This is far higher and about 100% more than a graduate teacher. With such an excessive workforce earning exorbitant salaries no wonder that the CEB cannot reduce the electricity bills of consumers. There are 6.29 employees for every megawatt (MW) of power generated by CEB while the Malaysian Electricity Board generates six times more power and has only 1.15 employees for one MW of power generated!

PAYE tax should be borne by the employee and it is against the Inland Revenue Act for an institution to pay the PAYE tax due from its employees. It has been revealed before the COPE (the Committee on Public Enterprises) that Rs. 5 billion has been paid by the CEB as PAYE tax to its employees during the period 2010-2019 in contravention of a Cabinet decision on 13 December 2007. This, the CEB has been doing at the expense of consumers, who have to pay higher tariffs.

Verite Research has revealed that Sri Lankan households pay 2.5 to 3 times more for electricity than the average cost to their counterparts in South Asian countries. Our rates are much higher than in Bangladesh and Afghanistan. For instance, a consumer using 300 units of electricity has to pay an electricity bill of Rs. 21,860 while the average equivalent rate in South Asia is only Rs. 7,340. This shows how our professional engineers have managed the CEB power generation so inefficiently over the years.

The reason for this inefficiency is due to the neglect of renewable energies in Sri Lanka. The CEB engineers have always advocated for more and more coal-powered plants. They have deliberately blocked renewable energy projects for obvious reasons. The Supreme Court has found the CEB guilty of blocking a proposal by Vavuniya Solar Power Private limited for a solar energy plant and ordered it to pay Rs 01 million rupees as damages. This, too, would have been paid from CEB funds and those who took such corrupt decisions have got off scot-free. The technical officers of CEB allege that CEB management has purchased power from private power plants despite an increase in hydro power generation. In case hydropower is insufficient to meet the demand another idling turbine at Norochcholai could have been put into operation. There are serious allegations that CEB engineers are intimately connected to such private power plants and even own all or part of them. The new government should appoint an independent commission to investigate allegations against the CEB.

Concerned Consumer