OUR FINANCIAL MESS

by Dr. Upatissa Pethiyagoda

We are constantly reminded of the sorry state of our Economy. This is simply to say that we are broke. We are also told that the accepted criteria, requiring some sophisticated computations are necessary to really understand the position. One trouble is that the figures from two or more such sources, often do differ substantially (for example the Central Bank and the Census and Statistics Department are often at variance). No amount of massaging can convert bad data into good conclusions. As the saying goes, figures cannot lie, but liars can certainly figure. What the ordinary citizen feels is that things cost so much more than they did within one’s memory.

My family teases me by saying that I am talking “Wolseley prices (1959)”, (A payment of Rs 9,000/= at Faleel’s in Kandy, secures a brand new Wolseley ‘1500’ collected in Harpenden, UK). They aver that salaries are much higher now than they were then! Probably so, for example our gardener is paid for a single day, about one quarter of the monthly salary I drew as Director of the CRI! My family are not impressed. It is doubtful that the 9,000 /= that yielded a full Wolseley then would buy them a set of tyres for it now! I hold that there are many things that I can quote (with an admittedly impaired memory) where unit prices have increased several hundredfold and some a thousand times, far outstripping concurrent income increases!.

There is also no national mention about one of the most immediate reasons – unbridled growth of population, exceeding expectations and leakages of Government assets (e.g Central Bank, EPF and NSB). And while we are about it, what happened to that currency deal of some 20 million (in currency notes) that changed hands in the Car Park of the Taj Hotel as the first tranche of a 50 million deal? Taken together this is a toxic mix. During World War II, one directive given by wartime Prime Minister Sir Winston Churchill, was to ensure that nothing (good or bad) should be hidden from public knowledge. In addition to the legendary reputation for British honesty, there was also the readiness of the people to suffer deprivation and hardship, in the solid faith that everybody was suffering equally.

Money takes meaning when it rewards genuine improvement, in productivity of materials or service. Here outlay is justified by output. The worst cases are bribery, corruption, smuggling, narcotics and similar acts of criminality and cheating, where cost comprehensively outstrips return. For example, MP’ voted themselves, a payment of Rs. 200,000/= per month purportedly “for electoral work,” while at the same time, denying estate labour their request for a daily wage of Rs.1,000/=. This is a quaint way of Division of Labour – one earning foreign exchange through hard sweat and toil, while the other is spending it equally strenuously in the “flesh pots” in various cities in different parts of the World. What could be fairer?

The twin processes that Government could take are obviously to:

(i) ensure that unnecessary expenditure is curtailed and

(ii) seek new means of raising revenue.

Managerial skill is to try, as far as possible to balance these two goals. The easy solution is to increase duty imposed on imports. This leads to price escalation. Populist measures have then to selectively grant subsidies or doles to keep the low income groups happy, thus leading to sizable increases in welfare costs. This is dangerous and further widens the gap between State income and expenditure. The Welfare State, it has been stated, can be the immediate prelude to the Farewell state!

In considering the local predicament, the need is for steps designed to alleviate immediate needs of our people. External issues concerning international trade, State debts, balance of payments and other high level verbiage, is beyond the ken of non-specialists and is sensed by the majority only when scarcities and price increases begin to bite.

Consequently, the Government has to seek new sources of income. I see at least six major opportunities:-

(i) Re-examine the VAT imposition to ensure that all collections are correctly reported and settled. This is hardly possible in a country where only some 200,000 income tax files exist, which relate to annual incomes (and Tax Returns), but many are still in severe default. Can such an inefficient system cope with monitoring of perhaps many million transactions per day? This has to be reformed to ensure that all VAT collections are properly managed. This is very unlikely. It is possible that VAT serves only to fleece the public and to aid fraudsters. I seized an opportunity to express this to a Deputy Minister of Finance at that time. He did not visibly shrug, but nothing has probably happened!

(ii) e did not shrug bat All Duty Free vehicles of MP’s which were hawked, should be recovered. Real Estate here and abroad, should be tracked. Like the Ownerless “Malwana Mansion” and probably many more. Where the public is able to track evidence of inexplicable wealth, there should be a method for rewarding them appropriately. (Customs detection from attempted smugglers could serve as an example). Constant mention is made about mega frauds, most leading to some political bigwig, the obvious remedy is to call for periodic declaration of assets by MP’s, if not annually, at least upon entering and exiting the “hallowed” Parliament. Why not? Does the “Cahoot Theory” apply and explain?. It is compulsory for Public Servants to declare their assets annually. Goose, Gander and Sauce! Nomination of candidates is an appropriate point at which to make such declaration mandatory. We understand that a very small number have made declarations, which are safely stacked away we are told, in somebody’s safe, away from public scrutiny. What is the point?

Here then is another source of income for our beleaguered State.

(iii) During the LTTE conflict, Mr. K.Pathmanathan (KP) was portrayed as the main Fund Manager of the vast wealth amassed by the LTTE. This was said to include a fleet of some seventeen ships, many Petrol Pumps, much Real Estate and every conceivable type of investment. This was how the LTTE ran its affairs professionally and effectively. Thus, when “KP” was captured in Malaysia and brought back to Sri Lanka, our entire nation was jubilant. By his (KP’s) own disclosures, when he faced Mr Gotabhaya Rajapaksa, Defense Secretary at the time, he fully expected to be eliminated. To his surprise, GR was very cordial and friendly – even offering a handshake and an inquiry about his health. After this, the public lost interest. After a while he “materialized” and is supposedly engaged in some “social work” in the Vanni.

If the Government recoups the virtual Gold Mine that he (KP) managed and was reputed to have been in charge, the Government will possibly be able to meet a substantial part of its deficit.

Whatever happened to this money if KP was captured along with this loot?

(v) A massive collection of Official vehicles was left to decay in a site just next to “Mumtaz Mahal” which was at one time, the official residence of the Speaker. They were mostly of luxury models and lay covered with creeper weeds. I learned that these awaited dumping in the sea – despite the existence of a “Marine Pollution Protection Agency”! Only the grave-yards for vehicles in the Arabian Desert which is part of Iraq, presented a similar sight, where oil-rich Kuwaitis abandoned their posh vehicles (eg Mercedes, Volvos etc), because it was more costly to junk them in Kuwait itself. It is probable that the Kollupitiya junk yard, said to be one of three around Colombo alone, once belonged to the Presidential fleet (Said to have been over 200). No one has been held accountable for this criminal waste.

(vi) As an index of our moral decay, when some 70 odd MP’s were found to have sold their vehicles or duty free permits, not only was nothing done, but someone had the brazen cheek to say that this was permissible because MP’s had to recover election costs! This great tolerance apparently did not apply where a poor woman who supposedly stole a few milk powder packets to feed her hungry children, one also recalls that a young child was persecuted for “stealing” a few coconuts! It was cynically claimed that those who framed laws were entitled to break them! Evidently, these little baskets (Printer’s Devil) think that we are all “Buth Kana Harak” – rice eating cattle!

So, as an interim measure, get all of the blokes who profited from this caper to pay back the ill-gotten profits they earned. There was also a display of documents in the social media, relating to two permits one of which was issued to one “Sirisena” who identified himself as “the MP for Polonnaruwa” and with a Polonnaruwa address!. On the very same day, it was alleged a “Mr Mahinda Rajapaksa, MP for Kurunegala” also had his “Land Cruiser”!. This was legitimate if the letters of the rule are sufficiently elastic. The duty waivers for these two vehicles was some 38 Million (?). If these revelations are not true, there should have been an official denial and perhaps even legal procedures instituted against the publishers of these malicious fabrications. There is no evidence of any such action. While at it, the fate of some 38 top flight “Jaguars” imported by the State, should be made known. Some very damaging and ugly rumours are afloat and should be countered. There is also the matter of a large number of vehicles held up at the Hambantota Port and released by a Ministerial fiat, which caused a heavy loss of some r a billions to the exchequer. As a general rule, rather than attempting to strangle the “social media” would it not be better for official denials of the sometimes outrageous allegations be met with convincing details from official records? Let us face it – the word MP is synonymous with corruption. This is grossly unfair by the several who are not crooked. But they should pluck up enough courage to challenge the crooks, and so take themselves out of the “Guilty Register” Among those who have succeeded at the recent polls are those who have emitted more than a mere stink of criminal misdemeanours. This does not promise well for the future.

Dear Mr President, you are reputed to be a strict disciplinarian. Retore our faith that you will cause action on this critical matter. Do not betray the trust reposed in you. Letus “Wait and see”.