by Dr Sirimewan Dharmaratne,
former Senior Analyst, HMRC, UK.

Although this may not be doable at all times, it is possible to retrospectively assess the economic impact of crucial decisions. While putting a value on a person may seem unethical or unconscionable, everyone has an economic value. Our lives are valued for myriad of commercial purposes, such as for insurance policies, compensation for work place injuries and death and for various illnesses due to environmental pollution and other such instances. In all these cases, what is valued is the economic life, and not the intrinsic value of the person itself.

The method is ‘what if’ concept; how much could he/she have earned if the person has not died or been incapacitated? The same concept could be extended to assess the value of critical events, such as natural disasters. The method simply is to compare the state before and after the even and put some economic value to the event or the decisionmaker.

Benefits of Mahinda Rajapaksa (MR)

The most seminal event that happened in Sri Lanka during MR regime was ending the war on terrorism in 2009. Friends and foes alike attribute this historic event to MR. Although there are different schools of thoughts on this, winning or to losing a war is ultimately attributed the leadership and not to anyone else. This is because it is the leader that takes decisions and accept all risks. Winston Churchill as the war-winning UK prime minister, Chinese revolution has been attributed to Mao Tse-Tung, and the ending the civil war in the USA has been attributed to Abraham Lincoln. The ensuing discussion and analysis are based on this premise.

Benefits of Ending the War

There is no doubt that there was significant economic revival after the end of the war. The underlying justification is that if he had not taken the decision to end the war, it would not have ended in 2009. As such, whatever the costs and benefits of ending the war can be attributed to MR. While a complicated economic evaluation is not possible within the context of this article, it is possible to see whether we have enough evidence to do a ‘back of the envelop’ economic assessment of ending the war.

Revival of Tourism

One of the unequivocal benefits of ending the war is the massive revival in tourism as seen in tourism statistics. The average tourism spending during the 5-year period before 2009 was about US$ 0.76 billion a year and during the 5-year period after the war was over US$ 2 billion a year. Therefore, the increase of revenue of around US$1.25 bn a year can be safely be attributed to the event of ending the war as this was the only pivotal event that happened in 2009. Assuming that 30% of these spending is net profit, then nearly US$ 2bn was accrued to Sri Lankan businesses during this 5-year period immediately after the war compared to the previous 5 years.

Economic Growth

There was nearly a 5% jump in the GDP growth in the year after the war. That momentum was maintained for the next two years. During the first three years over $16 bn was added to the economy compared to the $8 bn during the three preceding years. Unemployment that was well over 5% in 2009 (and in preceding years) dropped below 5% in 2010, for the first time since early 1990s. On the average unemployment fell by 0.34% year during the 5 years after 2009. No doubt other economic indicators showed similar positive trends.

Other Benefits

It is commonly believed that egregious corruption and irregularities were rife under the guise of war for many years, under all regimes during the 30-year period. These essentially ended after 2009. Then there are other benefits such as improved international relationships, more investments, building of several roads and highways and the general wellbeing of the citizen, which are all hard to quantify in this context. Although, this momentum in growth could not be maintained for a longer period due to regime changes, cronyism, complacency, capricious decision-making, and many other factors, they cannot unfortunately be quantified. While these unconscionable acts may or may not be directly attributed to MR, his cavalier attitude in some instances may have contributed to gratuitous corruption under his watch. Due to these reasons, a vast stream of benefits that could have resulted from the end of war never materialised.

Costs of Mahinda Rajapaksa

There are economic costs and financial costs. Financial costs are those borne by the taxpayer for his upkeep and benefit. These are the costs that are the focus of the ongoing controversy. Economic costs are the costs to the taxpayer arising from decisions that he may have taken. It is important to note that such decisions must have been approved by the parliament and therefore, any responsibility should be held collectively. Nevertheless, for this article we will assume that they are taken unilaterally and exclusively attributed to MR.

Two of the main projects that are constantly being flaunted are the Hambanthota port and the Mattala airport. Both these are portrayed as colossal waste of money. There is ample evidence that these main projects and others were undertaken without much thought. However, as far as this article is concerned, only the losses to the taxpayer resulting from these decisions are considered.

Large infrastructure projects yield benefits far in to the future as they have a very long lifespan. Further, their investments cost is not a loss, but only the losses incurred in their operation. Although, initially made significant losses due to lack of business, with the deal agreed with a Chinese investor in 2016, it appears that the port is no longer costing the taxpayer. In fact, there is already evidence that it could be profitable with the proposed oil refinery. Also, with the opening of the economy for imports, this could be a major trade hub. Therefore, for the purpose of this article, it is reasonable to use the widely quoted loss of US$216 million during the period of 2011-2016.

The Mattala airport on the other hand has incurred about US$140 million loss during the 5-year period of 2017-2022. There is still no evidence that it could be turned into a profit-making venture. There may be other smaller projects that could have made lesser losses. To account for all those, a rather ballpark figure of US$500 million sounds reasonable at least for the purpose of this exercise.

Financial Costs

The main contentious issue at the moment is whether the facilities (particularly the accommodation) at the disposal of MR is justified. Let’s say this current facility is available to MR for a 20-year period from 2015 and the monthly average imputed rent is Rs 20 million a month. Then the total cost to the taxpayer would be about US$16 million. Adding all other benefits that he is entitled to, a figure of US$ 50 million seems to be a reasonable assessment of the as the total cost of maintaining MR for a 20-year period from 2015.

Stolen Money

The main accusation of MR is not the few bad policy decisions that he may have taken or the cost of his retirement, but the colossal amount of money that he claimed to have stolen and stashed overseas. Despite years of accusations, the existence or the amount of this money is yet to be unambiguously ascertained. Unfortunately, there is no paper trail or digital footprint to show that taxpayer money has been siphoned out of the country. There is a further twist to these claims of stolen money. They are only relevant for this analysis, if taxpayer money (from the Treasury, for example) was taken out of the country. On the other hand, gratuitous payments directly deposited in foreign banks (commonly known as commissions) for awarding contracts are irrelevant as far as the taxpayer is concerned. This would only be an issue if the taxpayer was short-changed as a result of awarding contracts. Either way as far as stolen money is concerned, until definitive proof is surfaced, imaginary amounts cannot be taken into account.

Is he worth it?

The total loss to the taxpayer during the MR regime plus is subsequent maintenance costs for a 20-year period from 2015 comes to about US$ 0.5bn. It is important to note that the maintenance cost is only a fraction of the total economic loss due to the two main projects. Based on a very conservative estimate, net benefits from the revival of tourism alone could be nearing US$ 2bn for the 5-year period after ending the war. Then there are all other benefits resulting from accelerated economic growth in the immediate few years after 2009. Therefore, for MR to be a liability to the taxpayer someone will have to find at least US$2 billion of taxpayer money stashed somewhere. While this search is going on, it seems that MR has every right to stay put where he is now, purely from an economic view point.

This perfunctory analysis portrays how even in an extreme situation some objectivity can be imparted to the decision-making process. With some rudimentary information, decisions can be made more objective. Also, a nascent idea could be vastly improved by seeking and including actual data rather than hearsay. For example, the ‘analysis’ presented here could be immensely improved by adding factual information. This is a process that any government should introduce as a matter of principal in all decision making.