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Midweek Review

Pompeo follows Jiechi to Colombo

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US Secretary of State Mike Pompeo and Defense chief Mark Esper meet Indian National Security Adviser Ajit Doval (pic courtesy Hindustan Times)

By Shamindra Ferdinando

Yahapalana President Maithripala Sirisena and UNP leader Ranil Wickremesinghe hadn’t been able to reach a consensus on almost all major issues – ranging from economic policy to making available tabs to undergraduates. In spite of forming an administration, on the basis of the 19th Amendment, enacted in early 2015, Sirisena and Wickremesinghe didn’t see eye to eye on many matters. On many occasions, the former President publicly criticized Wickremesinghe’s approach to the Treasury bond scam,s allegedly perpetrated by the then Central Bank Governor, Arjuna Majendran, handpicked by the then PM, being the primary bone of contention.

In an interview with The Sunday Times, Austin Fernando, who had been Secretary to Sirisena (July 2017-July 2018), quite rightly pointed out that the unprecedented Treasury bond scams caused a major rift between the yahapalana leaders. Fernando endorsed the appointment of a Presidential Commission of Inquiry (P CoI) to probe the Treasury bond scams. What the one-time Defence Secretary Fernando didn’t say was that the appointment of the P CoI took place in January 2017- nine months after the second Treasury bond scam, and 22 months after the first.

Saman Ekanayake, who had served as Secretary to Wickremesinghe, in another interview, also published in the Oct 18, 2020 edition of the ST, asserted that the Treasury bond scams hadn’t been the major cause of the conflict between the yahapalana leaders.

Fernando and Ekanayake discussed a range of issues, and controversies, that led to the collapse of the much-touted yahapalana arrangement. As a result, the UNP ended up with one National List seat, whereas the SLFP managed to secure 13 seats on the SLPP (Sri Lanka Podujana Peramuna) ticket, and one on its own, at the last General Election.

The UNP parliamentary group consisted of 106 lawmakers, in the last parliament (2015-2020). In addition to the 106-member group, there was one elected on the SLMC ticket. The SLFP led UPFA (United People’s Freedom Alliance) commanded 95 lawmakers. The UPFA is no longer represented in parliament.

Fernando and Ekanayake, who enjoyed a ringside view, deliberated the yahapalana downfall. The discussions were quite useful and essential to understand the circumstances leading to Sirisena sacking Wickremesinghe, on Oct 26, 2018. Sirisena made his move, having failed to convince Wickremesinghe to give up the premiership, close on the heels of the debilitating setback the UNP and the SLFP suffered at the Feb 10, 2018 Local Government polls. However, the former officials failed to discuss the crucial and weighty US intervention here that facilitated Maithripala Sirisena’s emergence as the common candidate, at the 2015 presidential poll. The US intervention, both overt and covert, by way of the unpalatable Geneva accountability resolution, also contributed to the ultimate downfall of the yahapalana arrangement. Interestingly, there hadn’t been any reference to the Geneva resolution at all.

 

Pompeo here in the wake of Jiechi

 

Let us now discuss the US role here against the backdrop of US Secretary of State Mike Pompeo’s visit this week, close on the heels of former Chinese Foreign Minister and the current Communist Party Politburo Member Yang Jiechi meeting President Gotabaya Rajapaksa. Earlier, Pompeo was scheduled to arrive in Colombo on June 27, 2019, on a short visit, during the yahapalana administration. Although the cancellation took place, amidst the SLPP and nationalist groups protesting against the finalization of SOFA (Status of Forces Agreement) and MCC (Millennium Challenge Corporation) agreements, the US Embassy in Colombo, however, gave this excuse: “Due to unavoidable scheduling conflicts during his upcoming visit to the Indo-Pacific region that includes accompanying President Donald J. Trump to the G20 Summit in Japan, U.S. Secretary of State Michael R. Pompeo is unable to visit Sri Lanka as previously announced.”

Ahead of Pompeo’s arrival, the US threatened Sri Lanka, struggling to cope up with the deadly coronavirus, over its close relationship with China. “We urge Sri Lanka to make difficult but necessary decisions to secure its economic independence for long-term prosperity,” attributed to Dean Thompson, the top diplomat in charge of South Asia, is nothing but a threat. The message is clear.

Obviously, in spite of the change of government, in Nov 2019, the US expects Sri Lanka to remain committed to a hidden agenda, reached with the previous yahapalana administration. With China quite stubbornly pursuing its strategies, at both regional, as well as global level, the US seems hell-bent on subverting Sri Lanka, now experiencing the worst ever financial crisis, since independence.

The US warning reminds us of the Indian National Security Advisor Ajit Doval’s demand, during Mahinda Rajapaksa’s second term, that Sri Lanka terminate/take back all major Chinese-funded infrastructure projects, including the Colombo port city, as well as the Hambantota port. The US-India-Japan coalition is determined to thwart China’s growing strength, at both regional and global level.

Australia joining India, the US and Japan, in the Malabar naval exercises, in the Indian Ocean, in Nov 2020, should be examined in the context of the US-led confrontation with China.

Carried out annually, since 1992, the strategic manoeuvres have grown in size, and complexity, in recent years, to meet what the US Navy has termed as a “variety of shared threats to maritime security in the Indo-Asia Pacific.”

The participation of Australia means that all four members of the Quad aka Quadrilateral Security Dialogue will be participating in the exercises, amidst growing Indo-China and China-US tensions.

Pompeo is the second US Secretary of State to visit Colombo. in 50 years. John Kerry was here in the first week of May 2015. amidst the deepening turmoil over the first Treasury bond scam. Having called on Sirisena, at the Presidential Secretariat, Kerry held bilateral talks with the then Foreign Minister Mangala Samaraweera at the Ministry of Foreign Affairs. Among those on Samaraweera’s team, at the talks, were the then Finance Minister Ravi Karunanayake (embroiled in the first Treasury bond scam), Justice Minister Wijeyadasa Rajapakse, who was later sacked by Sirisena, at the behest of Wickremesinghe, and then Sri Lanka’s Ambassador in Washington Prasad Kariyawasam, who, years later, turned up at the Parliament as Speaker Karu Jayasuriya’s advisor, paid by the USAID. Kariyawasam served as the Foreign Secretary before taking up the USAID paid controversial appointment. Wickremesinghe hosted Kerry for lunch at Temple Trees.

Five years later, Pompeo’s visit takes place against the backdrop of the political setup here undergoing an unprecedented change. The UNP is irrelevant in today’s political context with its leader Wickremesinghe failing, at least to regain his Colombo seat. Samaraweera and Karunanayake are no longer members of parliament either, with the latter under investigation by the CID over the Treasury bond scams. Sirisena and Wijeyadasa Rajapakse represent the SLPP and one-time US citizen, Gotabaya Rajapaksa, is the President and Commander-in-Chief of the Armed Forces. With the passage of the 20th Amendment, the way is now cleared for the President to assume duties as the Minister of Defence, properly.

 

US interventions in 2010 et al

 

In the wake of Sri Lanka’s triumph over the LTTE in May 2009, the US feared the Rajapaksas forging closer ties with Beijing. The US pushed one-time LTTE mouthpiece, the Tamil National Alliance (TNA) to throw its weight behind the then common candidate, the war-winning Army Chief, General Sarath Fonseka, at the January 2010 presidential election. The Illankai Thamil Arasu Kadchi (ITAK)-led TNA had been reluctant to participate in the high profile political project and was really embarrassed by what it was asked to do. But, the US insisted on the TNA participation. The US had no qualms in backing Fonseka, despite having accused him and his Army of war crimes.

Thanks to Wikileaks revelations, the US role in the formation of the UNP-led coalition, to back Sarath Fonseka, is in the public domain. A confidential cable from the US Embassy, in Colombo, dated January 1, 2010, leaked by Wikileaks, revealed how Samapanthan provided a copy of an agreement signed by Wickremesinghe, in his capacity as the UNP leader and the common candidate Fonseka to implement, what the then US Ambassador here Patricia A. Butenis called, a genuine power sharing agreement acceptable to all communities. The JVP, as well as the SLMC, backed Sarath Foneka’s candidature. In spite of winning all predominantly Tamil and Muslim districts, in the Northern and Easter Provinces, comfortably, Fonseka suffered a humiliating defeat as a result of the majority Sinhala community rejecting him. The war hero lost by a staggering 1.8 mn votes.

Five years later, a very much similar US clandestine project, with the active participation of India, succeeded here. The same coalition successfully backed Sirisena’s candidature, at the 2015 presidential election. Having installed Sirisena, as the Executive President, the UNP implemented its programme. Former top aides to Sirisena and Wickremesinghe explained how Wickremesinghe pursued his objectives, though the Geneva issue didn’t receive attention at all.

In the run-up to the 2015 presidential election, the UNP-led coalition repeatedly warned that Sri Lanka faced international sanctions if Mahinda Rajapaksa secured a third term. The yahapalana coalition repeated, like a mantra, that Western powers would impose crippling sanctions over war crimes accusations, unless Sirisena’s victory paved the way for a negotiated settlement with the Tamil community. In the wake of Sirisena’s victory, the UNP moved swiftly and decisively to reach consensus with the US over accountability issues.

As a result of negotiations, Sri Lanka, on Oct 1, 2015, co-sponsored the despicable Geneva resolution against one’s own country, sponsored by the US and its pliant allies. The war-winning Rajapaksa government, in no uncertain terms, declined to co-sponsor a resolution against its own armed forces, regardless of the consequences. The yahapalana government finalized the Geneva resolution, just over a week after Sri Lanka’s Permanent Representative in Geneva, Ambassador Ravinatha Aryasinha strongly advised against the move at the first informal talks on the draft proposal in Geneva. The UNP dismissed his objections

Less than a year later, TNA heavyweight M.A. Sumanthiran revealed the existence of an understanding among Sri Lanka, the TNA and the US as regards the Geneva resolution, inclusive of foreign judges and other experts in a proposed war crimes court. The revelation was made in Washington, with the then Sri Lanka’s Ambassador there, Prasad Kariyawasam, by his side. Although the Sri Lankan mission, and the Foreign Ministry here, conveniently refrained from making any reference to Sumanthiran’s shocking disclosure, in their media statements, the TNA released the MP’s full speech.

A government appointed Consultation Task Force on Reconciliation Mechanism (CTFRM), too, recommended the participation of foreign judges in war crimes courts, to be established in accordance with the 30/1 Geneva Resolution, adopted in Oct 2015. The CTFRM, headed by Manouri Muttetuwegama ,comprised Dr. Paikiasothy Saravanamuttu (its Secretary), Gamini Viyangoda, Visaka Dharmadasa, Shantha Abhimanasingham PC, Prof Sitralega Maunaguru, K.W. Janaranjana, Prof. Daya Somasundaram, Dr. Farzana Haniffa, Prof. Gameela Samarasinghe and Mirak Raheem.

 

Sirisena saves UNP

 

In spite of the bad blood, between Sirisena and Wickremesinghe, over the first Treasury bond scam, blamed on the latter’s choice as Governor of the Central Bank (Arjuna Mahendran), the President went out of his way to save Wickremesinghe, and the UNP. Wickremesinghe quite easily forgot how Sirisena ensured the support of the UPFA parliamentary group, sans that of Sarath Weerasekera, for the passage of the 19th Amendment.

Wickremesinghe was able to secure over 200 votes for the 19th Amendment, though the UNP had less than 50 members in parliament at that time. This was in spite of the perpetration of the first Treasury bond scam, several weeks before the vote on the 19th Amendment.

The UPFA backed the UNP initiative, though, by then, on Sirisena’s directive, the SLFP had lodged a complaint regarding the first Treasury bond scam with the CIABOC (Commission to Investigate Allegations of Bribery or Corruption). Sirisena dissolved parliament on the night of June 26, 2015 to deprive COPE (Committee on Public Enterprises) Chairman Dew Gunasekera of an opportunity to present its devastating report on the first Treasury bond scam, though some blamed the President for not dissolving the parliament on the third week of April 2015 on the completion of the 100-day programme.

 

UNP-SLFP alliance

 

If not for the hasty dissolution, the COPE report would have been presented to parliament, ahead of the general election. Had that happened, the UNP would have suffered a major setback. Sirisena not only saved the UNP from an extremely difficult situation, but also delivered a stunning blow to his own party, the SLFP, a couple of weeks before the election. Sirisena declared that even if the SLFP-led UPFA won the general election, Mahinda Rajapaksa wouldn’t be appointed the Prime Minister, under any circumstances.

There had never been such a treacherous statement by a leader of a political party, in the post-independence era, though treachery and duplicity were all part of the game. But Sirisena did just that!

Sirisena and Wickremesinghe ensured that the 19th Amendment provided constitutional foundation for the UNP-SLFP coalition. They exploited the very law meant to restrict the number of ministers and non-cabinet ministers to 30 and 40, respectively, to authorize the expansion of the cabinet as well as non-cabinet positions. Member of the UNP-led coalition, R. Sampanthan, who had betrayed democracy by recognizing the LTTE as the sole representative of the Tamils, in late 2001, was chosen as the Opposition Leader, and accommodated on the Constitutional Council.

The US and its allies, who shout so much about transparency, conveniently turned a blind eye to what was happening in parliament. They wanted a situation in parliament, conducive for the implementation of their overall sinister strategy. By Sept 2016, the US had reached an agreement worth Rs 1.93 bn (USD 13 mn) to influence the decision-making process here, whereas Wickremesinghe pursued a new constitution making process as part of that strategy.

Parliament owed the public an explanation as to how the US-funded project was implemented and the benefits received by Sri Lanka. It would be pertinent to mention the UPFA Joint Opposition Group (now SLPP), too, cooperated with the UNP in the constitution making process. The National Freedom Front (NFF) quit the process, in mid-2017. However, its efforts to persuade the rest of the JO to discontinue its participation failed.

Having formed the government, with Sirisena’s help, following the August 2017 general election, the UNP perpetrated the second much bigger bond scam, in late March 2016. Still, the UNP pushed hard for the extension of term for the Singaporean as the Central Bank Governor, who was under heavy fire over the Treasury bond scams. At the time of the fraudulent transactions, the Central Bank was under the purview of UNP leader Wickremesinghe, who held the policy planning and economic affairs portfolios. Within two weeks, after the January 8, 2015 presidential election, Wickremesinghe, by way of a gazette, brought the Central Bank and the Securities and Exchange Commission under him. They had been under the Ministry of Finance, a portfolio held by UNP Assistant Leader Ravi Karunanayake at the time Wickremesinghe stepped in. The Public Utilities Commission, too, was brought under Wickremesinghe.

If not for the Treasury bond scams, perhaps Wickremesinghe could have succeeded in bringing the Geneva-backed constitution making process to a successful conclusion. Contrary to some disagreements, the yahapalana leaders basically agreed with the script written by the US.

Sirisena quietly allowed the finalization of the ACSA (Acquisition and Cross Servicing Agreement) in early August 2017. The ACSA, first signed by the then Defence Secretary Gotabaya Rajapaksa, during Mahinda Rajapakas’s first tenure as the President, received the President’s approval, though the President subsequently vowed he wouldn’t allow any agreement inimical to Sri Lanka as long as he enjoyed executive powers. This declaration was made at a meeting with editors of national newspapers and senior representatives of both print and electronic media at the Janadhipathi Mandiraya. When the writer sought a clarification regarding the ACSA, Sirisena acknowledged the finalization of the agreement, in the first week of August 2017. The UNP never found fault with Sirisena for giving the go ahead for the ACSA finalization. As far as the yahapalana policy, vis-à-vis the US, both Sirisena and Wickremesinghe took one stand though sometimes, Sirisena tried to distance himself from Wickremesinghe’s Geneva policy.

Don’t ever forget, the yahapalana government never took tangible measures to use Lord Nasby’s disclosure, in Oct 2017, in the House of Lords, to save the country from the Geneva trap. Sri Lanka did nothing even after the US, in June 2018, quit the Geneva body, alleging it was nothing but a cesspool of political bias. For some unknown reason, the SLPP administration, too, is yet to use Lord Naseby’s disclosure properly to clear its name. Now that Foreign Minister Dinesh Gunawardena has alleged that Army Chief Lt. Gen. Shavendra Silva was black listed by the US, as a result of the Geneva resolution, the government should take appropriate measures to have the country cleared of war crimes. Lt. Gen. Silva cannot get out of the US listing as long as Sri Lanka didn’t successfully challenge the Geneva resolution, based on unsubstantiated allegations.

The incumbent government is yet to adopt comprehensive measures to deal with the Geneva resolution. In spite of various declarations, made by the government, the Geneva resolution remains active, with the UK in charge of the project. The US, though being out of the Geneva body, continues to back the Geneva process to pressure Sri Lanka to accept its combative proposals. The recent US State Department statement is a case in point. Pompeo’s visit further amplifies the danger Sri Lanka is in as already the economy is in a tailspin, due to the rampaging coronavirus. The possibility of those eyeing Sri Lanka, exploiting weaker economic conditions and creating further complexities, cannot be ruled out. It would be important to keep in mind how the yahapalana government made an attempt to cut off China, by halting the Port City project, in 2015, but ended up not only rescinding that directive but handing over the Hambantota port, on a 99-year-old lease, to Beijing.



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Midweek Review

How bankruptcy paves way for exploitation of Sri Lanka

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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.

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Midweek Review

The Bonhomie of the Ages

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By Lynn Ockersz

Ignoring aching hearts and limbs,

And unmindful of days passing,

The men slumped in their Tuk-Tuks,

Continue their lonesome vigil,

In queues snaking into the distance,

For those never-coming cans of fuel,

Promised by smooth-talking Sires,

That could help fetch a few more coppers,

And delay the onset of starvation,

But thanks to the age-old wisdom,

Handed to them by their humble elders,

The only inheritors of the pristine Dhamma,

The men are not bereft of compassion,

So much so, they share the frugal meals,

The Sweat of their Brows has yielded.

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Midweek Review

Economic meltdown

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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.

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