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Preparing for ‘beyond GSP Plus’

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By Neville Ladduwahetty

 

In the midst of all the challenges that Sri Lanka is currently facing, the prospect of having to prepare itself for a possible temporary withdrawal by the European Union (EU) of its tariff preference in favour of developing countries known as GSP+ at this particular juncture, when the whole world is desperately trying to cope with the effects of a pandemic, runs counter to the EU’s own mission of helping developing countries through GSP+. This preferential treatment is extended to Low and Middle Income countries as classified by the Word Bank. According to this classification the Gross National Income (GNI) of Low Middle Income Countries varies between $1036 and $4045, while GNI of Upper Income Countries varies between $ 4046 and 12535.

The GNI per capita in Sri Lanka has hovered around $4000 depending on the method of calculation. Therefore, reaching a GNI per capita greater than $4046 is not much of a stretch. However, the issue is that a GNI in excess of $4046 needs to be sustained for three consecutive years for Sri Lanka not to qualify for tariff preference; a benchmark that is applicable for normal global conditions. Sri Lanka reached the Upper Income Status in 2019 prior to COVID-19. If not for COVID-19 Sri Lanka could have maintained the growth momentum for three years and beyond, in which event Sri Lanka would have lost the benefits of tariff preference. The fact that no allowance is made for a shortfall in GNI per capita due to a global pandemic, the consequences of which are experienced by every country, is not only deeply regretted but also lacks acknowledgement of reality. If such an allowance is made for 2020 and 2021 there is a strong possibility that Sri Lanka could reach the Upper Income status in 2021 and the requirement for three consecutive years would have been met. In such an event Sri Lanka would have lost tariff preference for GSP+ anyway. Therefore, the EU should seriously consider adjusting the threshold for Upper Income category for countries such as Sri Lanka that hover around the lower limit of Upper Income, instead of waiving temporarily or otherwise, GSP+ based on standards that do not apply for unprecedented global catastrophes.

As stated by former Director General, Dhammika Senasinghe, for Europe, Central Asia, the EU and Commonwealth, of the Foreign Ministry of Sri Lanka at a business forum, “As Sri Lanka progress to graduate to upper middle income states in the future we will be not qualify for the GSP+ benefits, which means we would need to work out on a special trading arrangement with the EU whilst highlighting our climate change related vulnerability also under the sustainable development criteria.” (ECONOMYNEXT, June 23, 2021).

Therefore, Sri Lanka has to prepare for the day when it is not eligible to GSP+. Since this is a real prospect, the Government should set up a group that is knowledgeable and experienced in trade related issues, preferably with international experience to prepare a proposal that could serve as a blue print for negotiations with the EU. The mandate for such a team should be to provide the same tariff preferences as the current scheme, or better for substantially all trade.

 

GSP+ to HELP DEVELOPING

COUNTRIES

According to the European Commission, GSP+ is a “Special Incentive Arrangement for Sustainable Development and Good Governance”. Furthermore, the Commission states: “The GSP+ scheme is designed to help developing countries assume the special burdens and responsibilities resulting from the ratification of 27 core International Conventions on human and labour rights, environmental protection and good governance as well as from the effective implementation thereof. It does so by granting full removal of tariffs on over 66% of tariff lines covering a very wide array of products including, for example, textiles and fisheries”.

Despite these inducements nearly 75% of the 193 countries remain in the Low or Upper Income category, as per the World Bank. Furthermore, only eight (8) countries are beneficiaries of the GSP+ scheme. They are, Armenia, Bolivia, Cape Verde, Kyrgyzstan, Mongolia, Pakistan and Sri Lanka. Therefore, there has to be an explanation why more Low Income Countries are not attempting to take advantage of the tariff preference and work towards becoming an Upper Middle Income country. For instance, India, Nepal, Bhutan and Bangladesh are not beneficiaries. Perhaps each of these countries have negotiated and initiated arrangements outside the constraints of GSP+ Therefore, there is a need to study the policies and strategies adopted by these countries including Vietnam, in order to stay competitive without the benefits of tariff preference of GSP+.

 

SITUATION in SRI LANKA

The former DG cited above opined that “Sri Lanka utilization rate of facilities is around 55- 58 percent, while Pakistan is 96 percent and the Philippines is 73 percent. Confirming this situation during the 14th Trade Policy Review of the European Union held on 18th February 2020, at the WTO, Geneva, the Sri Lankan delegation stated: “judging from Sri Lanka’s two years’ experience, the utilization rate of the GSP+ facility by Sri Lankan exporters stand relatively low at 55 – 60%, due to several reasons, including difficulties of qualifying GSP preferential Rules of Origin Criteria. For instance, more than half of the apparel exports of Sri Lanka enter the EU market without availing the GSP+ facility, but paying relatively high import duties compared to other industrial goods”.

Continuing the Sri Lankan Delegation stated: “Sri Lanka is in the verge of losing the EU GSP/GSP+ benefits from 01st January 2023, if this Status continues for two consecutive years. Sri Lanka has already flagged this situation and wishes to negotiate an alternative bilateral preferential trade mechanism or alternatively, a special scheme of preferential market access for small and vulnerable countries in the upper middle-income category.

Whatever measures Sri Lanka adopts to improve the rate of utilization of facilities, the stark fact facing Sri Lanka is how to use the facilities offered by the EU when Sri Lanka is recognized as an Upper Income Country. How to prepare for such an eventuality should be the focus of the government. In such a context, the dire warnings by commentators about the prospect of losing the benefits of GSP+ on grounds of the status of Human Rights in Sri Lanka, highlighted by the UN Human Rights Commissioner and the ineffective measures adopted to address accountability and reconciliation by the Core Group, would be secondary to losing GSP+ on grounds that Sri Lanka is recognized as an Upper Income Country not only for its economic gains but also for its noteworthy achievement in the field of Human Development that in fact surpasses some of those within EU’s 27 Members.

If Sri Lanka is to undergo experiences similar to what it had to endure with the withdrawal of GSP+ in 2010 on grounds of the Human Rights situation in the country, the prediction is that many factories and commercial establishments would close down and thousands would lose employment at a time when the public is already facing unprecedented hardships due to COVID-19. Therefore, instead of waiting for the axe to fall, Sri Lanka should adopt a “proactive approach” as suggested by the Free Trade Zone Manufacturers Association (FTZMA). However, it would have been helpful if the FRZMA had specifically proposed such an approach.

 

GEOPOLITICAL DIMENSIONS of the EU RESOLUTION

The Resolution of the EU Parliament having given regard to related documents and a Preamble with paragraphs A to K, proceeds to adopt nineteen (19) Resolutions. Nearly all the issues Resolved either impact on issues within the domestic jurisdiction of Sri Lanka or relate to GSP+ except for paragraph 18 of the Resolution which states: “Expresses, concern about the growing role and interference of China in Sri Lanka”. The question that naturally arises is whether the real reason for Paragraphs 14 and 18 to co-exist in the same Resolution is because of genuine concern for Human Rights or because of concern for China’s “growing role and inference of China in Sri Lanka?

Paragraph 14 states: “Underlines that the GSP+ scheme offered to Sri Lanka has made a significant contribution to the country’s economy, from which exports to the EU have increased to EUR 2.3 billion, making the EU Sri Lanka’s second-largest export market; highlights the ongoing monitoring of Sri Lanka’s eligibility for GSP+ status and stresses that the continuance of GSP+ trade preferences is not automatic; calls on the Commission and the European External Action Service (EEAS) to take into due account current events when assessing Sri Lanka’s eligibility for GSP+ status; further calls on the Commission and the EEAS to use the GSP+ as a leverage to push for advancement on Sri Lanka’s human rights obligations and demand the repeal or replacement of the PTA, to carefully assess whether there is sufficient reason, as a last resort, to initiate a procedure for the temporary withdrawal of Sri Lanka’s GSP+ status and the benefits that come with it, and to report to Parliament on this matter as soon as possible”.

If the EU hopes to use a temporary withdrawal of GSP+ to make matters difficult for Sri Lanka because of China’s growing role in Sri Lanka, the EU may be acting against its own interests of staying engaged with Sri Lanka because China is bound to grab the opportunity and entrench itself even further. Therefore, it is in the interest of the EU to stay engaged with Sri Lanka and negotiate an arrangement special to Sri Lanka, conscious of the fact that Sri Lanka would not be eligible for GSP+ anyway, in the very near term.

CONCLUSION

After wading through paragraph after paragraph of the EU Resolution, the only two paragraphs that matter are paragraphs 14 and 18. While the former intends to explore the prospect of a “temporary withdrawal” of GSP+ as leverage to advance Human Rights in Sri Lanka, the latter is concerned with the “growing role and interference of China in Sri Lanka”. While a temporary withdrawal is bound to hurt Sri Lanka at a moment of unprecedented hardship due to COVID-19, there is a strong possibility that China would take advantage and step into the breach. Such an outcome would not be in the interests of the EU and the recently stated resolve of the G7 to Build Bigger and Better (B3B), in order to counter the growing global imbalance created by China’s Belt and Road initiative.

Instead, it would be far more prudent for the EU to stay engaged with Sri Lanka because doing so is in its own interest and that of the West, and recognize that Sri Lanka is on the threshold of becoming an Upper Income Country, and in keeping with such a prospect work out arrangements as stated in Article 4 of EU’s GUIDE to SRI LANKAN EXPORTERS. Article 4 states: “Sri Lanka would become ineligible for the GSP+ scheme should the EU conclude a Preferential Trade Agreement with Sri Lanka, which provided the same tariff preferences as the scheme, or better, for substantially all trade. The EU is currently not negotiating any further trade agreements with Sri Lanka”.



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Prospects for NPP/JVP at the next election

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by Kumar David

Several months ago I brought to my reader’s attention a straw-poll that I had conducted among my friends on the left of the political spectrum, university colleagues and liberal intellectuals on two matters; (i) their own voting intentions, (ii) what they perceived were the electoral prospects of the NPP/JVP. The replies were consistent. Most said that they would vote for the NPP/JVP or that they were mulling over it. Almost all declared that would not seriously consider Sajith or Ranil led outfits and that anything linked to the Rajapaksa-Porotuwa garbage heap was out of the question. Regarding whether the NPP/JVP could win an election most people in my straw-poll had reservations. While they were themselves satisfied that the JVP would never again repeat the madness of 1971 and 1989-91 they reckoned that the electorate at large was still anxious (minissu thaama bayai). I am grateful to all who wrote to me (actually everyone I contacted replied) for their frankness and careful evaluation of ground realities.

The National Peoples Power (NPP), an alliance of about 28 political parties, trade unions and grass-roots organisations conducted a public seminar on January 24, 2023, which was jam packed, not enough seating room. The keynote speaker was Anura Kumara Dissanayake (Anura hereafter) who was very clever in how he handled the seminar by declaring right at the start “People are concerned about our economic policies; they want to know how we will handle the economy”. Now indeed this is true, but it also let him off the hook about the insurrectionary folly of 1971 and 1989-91 and allowed him to skirt the concerns of the ethnic and religious minorities. I will touch on all three issues, economy, minorities and political adventurism in this short article while giving priority to the economic discussion in the light of the enormous success of the January 24 Seminar/Symposium/Consultation.

Yes, there is considerable interest in the JVP’s economic programme since it has never been explicitly spelt out in the past except as simple anti-imperialist and anti-neoliberal slogans. Anura, as expected focussed on the great hardships the people were suffering because of the ongoing economic crisis, the unbearable increase in prices and the breakdown in public services – hospitals for example are short of medicines, dressings for wounds and beds.

I will begin by picking up six crucial economic issues that arose from the January 24 seminar without stating whether the questions were or were not adequately addressed by the panellists on the stage. It is the right answer to the questions that matters most not whether the panellists got it right or are still working towards adequate solutions. What’s the rush, the elections aren’t tomorrow?

Will an NPP/JVP government be friendly to private-sector businesses?

How will Small and Medium Enterprise (SME) be encouraged and financed?

What is the attitude of the NPP/JVP to loss making state enterprises?

How will foreign investment be encouraged?

What is the is the right approach to Free Trade Agreements with other countries?

How will digitisation of production and of enterprises be encouraged?

I will now proceed to comment on these seven economic issues without indicating whether my comments are the same or different from what the panel members said. There is lots of time more to the next election; we are in the midst of a discussion in progress. Let’s go step by step. Yes, the NPP/JVP should aim to consolidate a mixed economy and therefore the role of the private sector must the recognised. As will become clear when I answer questions lower down what has to be consolidated is a dirigisme economy where the state directs fundamental policy, emphasis being on the word fundamental. In Singapore, South Korea and above all in China (Deng Xiaoping onwards) the private sector prospered although the directive role of the state in the broad sense was retained.

Making resources available for SMEs has to be undertaken as a matter of policy. Certain banks must be identified for that purpose, policy instruments create and funding provisions made via the Treasury. Support for SMEs has to be a state responsibility.

In my view policy towards loss-making state enterprises needs to be well defined. White elephants like Sri Lankan Airlines should be sold off. Loss making state enterprises have to be divided between those who make a loss because they carry a huge consumer subsidy (electricity for example) and others which are fattening an excessive work-force (some portions of the petroleum industry). In respect of the former the NPP/JVP has to decide to what extent and for how long a subsidy is a political necessity, and in respect of the latter a ruthless but time diversified closure policy adopted. Time has to be given for people to learn new skills to find alternative employment avenues. Digitisation is a specialist topic and I was pleased with the response of the relevant member (I am unable to recall his name) of the Seminar Panel who spoke briefly on digitisation and showed an expert grasp of his subject.

From a left propaganda point of view to speak of the tremendous hardship that the sudden economic crisis and the post-Covid and post global-recession period, had created is straightforward. Anura drew attention to the great hardships of the masses, the need to provide additional resources and made a fairly straightforward moral argument. The practical point is how to get this done without cutting other contending demands and how to persuade China to restructure rather than defer (postpone) debt repayment. Though I am a member of the NPP and have been an electoral candidate on the NPP National List slate what I say in this article is not NPP policy, rather is an open-ended contribution towards the ongoing discussion and it is intended to help formulate NPP policy. There is a long way to go before the next election and the lot more water will have to flow under the bridge before the NPP finalises its positions.

It is in this spirit that I make the comment that the NPP needs to openly declare that its model can, broadly, be described as social-democracy. Obviously, it is absurd to focus on prescriptive details but alternatives such as a USSR type state directed economy or the outdated Cuba-Venezuela-Angola-Ne Win Burma models are out of the question. Pakistan with the tacit approval of the Imran Khan opposition, Bangladesh, Malaysia, Indonesia and Mongolia de facto, in the context of post-Covid, global recession threatened world, have explicitly or all but explicitly endorsed social democracy. The NPP must have the gumption and the courage to explicitly state that it stands for social-democracy. It must tell the JVP that the old model of in the Wijeweera days is all dead and useless.

“Pepe” Mujico (Jose Mujia) the 40th president of Uruguay from 2010 to 2015 is described as the world’s humblest head of state. He donated 90% of his $12,000 monthly salary to charities. He was an outspoken critic of capitalism. A former guerrilla with the Tupamaros, he was tortured and imprisoned for 14 years by the military Uruguayan dictatorship (1973-85). Military dictatorships are the foulest and most abominable of regimes in the world. In Argentina for example the military dictatorship (1976-83) threw its opponents, alive into the sea out helicopters and that included pregnant women. Have no doubt that a military dictatorship in Sri Lanka will do the same. Have we not had enough experience of what unfettered military power can do? Sixty thousand young men and women perished when military power ran unchecked in 1989-91. But this comment is by the way, what I wish to say is something else; it’s about social-democracy. Pepe’s most famous quip is that if Uruguay was a big European country it would have become famous as the home of modern social-democracy. The point then is that in this complex and uncertain period the correct model to explicitly assert is social-democracy. The NPP must openly and explicitly declare itself a social-democratic entity.

I promised to comment briefly on minority concerns and the insurrectionary history of the JVP before I sign off. I would like to see the NPP explicitly reject the Wijeweera-Somawana storylines. That is reject Wijeweera’s fifth lecture and his general antipathy to plantation Tamils. Likewise, I would like to see the NPP dissociate itself from the Somawansa – Sarath Silva intervention that dissolved N-E provincial unity. More broadly I would like to see the NPP declare itself in favour of devolution to minority communities and to provinces. Obviously specific details remain to be clarified and that should be the topic of many fruitful discussions in NPP forums.

On the matter of apologising for the insurrectionary excesses and anarchist folly of 1971 my friend Prof Eich persuaded me that this is an unrealistic expectation and I should drop the matter. I agreed and remained silent for about two years. But as the NPP/JVP influence spreads more broadly into the Sinhala petty-bourgeois and rural classes the topic is raising its head again – (minissu bayai). An election winning strategy cannot plaster over that. The pathological madness that, as in the Cultural Revolution, the past has to be utterly destroyed in order to build the world anew may have influenced some in the extremist ranks of the JVP some decades ago. I have indeed run into many admirers of the Cultural Revolution in “those” times. However now the NPP must be uncompromising; there is no room for sympathy for any of this in its commitment to social-democracy.

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75 Years: How a halcyon start became a horrible sorrow – A tale of two compacts and two economies

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by Rajan Philips

Sri Lanka, then Ceylon, became independent in the best of times. Almost all contemporary accounts said so. A model colony was becoming independent unexpectedly soon with no struggle or sweat. No other emerging polity apparently had it so good. The economy was on a roll by the measures of foreign reserves and local consumption levels. As a small island it was easy to be overcome by modernization. Road and rail networks crisscrossed the island, telecommunications and postal services were bringing people closer. Public education was free and public health was looked after, the two anchoring a robust welfare system that was unique among comparator colonies. The population was under seven million and even though the vast majority of the people were relatively deprived, there was optimism that there was opportunity for everyone.

Universal franchise had been introduced 17 years earlier, in 1931, and the people had had a head start in experiencing electoral democracy – uniquely among non-western polities and well ahead of quite a few western ones. Independence arrived on the back of a new constitution, which was a simple text crafted by unassuming legal drafting and not the exalted product of a ponderous constituent assembly. Yet Sri Lanka’s first constitution, unlike its successors, was a compact document that possessed too many virtues and too few faults. Most importantly, it underwrote the communal compact that was the necessary and sufficient prerequisite for the colonial rulers to handover power to their local successors.

“Communal Compact” (AJ Wilson) is the idea that the (Soulbury) Constitution and the granting of independence were the result of a political agreement among the country’s constitutive “communal groups.” Put another way, the British had to either assume or believe that there was such an agreement among the Sinhalese, the Tamils and the Muslims before deciding on the timing and the terms of their departure. Before long, however, the communal compact came under stress and eventually broke.

After 75 years, the controversy is over a different and somewhat narrower compact – the ‘devolution compact.’ Equally, the seemingly salubrious economy that greeted independence in 1948, has now become a deflated and damaged economy requiring intensive treatment in 2023. Hence, the tale of two compacts and two economies. But how did we get here?

Broken Economy

The answers go back to the circumstances in which Sri Lanka became independent. There was more to them than the rosy pictures painted by contemporary accounts. There were already economic fissures and sociopolitical fault lines. These fissures and fault lines defined the political questions of the day and the political alignments that arose out of them. How they unfolded is the story of Sri Lanka after independence. It is an overtold story, but there are always new takes on them as new generations come along to live through the same old problems.

For all its consumption complacency, the economy in 1948 was the “classical colonial export economy”. Plantation exports paid for consumption imports and left a not too small Sterling surplus as bonus. However, the situation was structurally unsustainable. A fast growing population and a politically demanding consumption culture could not be supported indefinitely by the export earnings from tea, rubber and coconut alone. Within a decade, foreign reserves fell from one year worth of imports to four months of them. There has been no looking back since, albeit the wrong way.

The decades following saw severely imposed import restrictions that did not, however, serve the textbook purpose of stemming consumption and accumulating aggregate savings for productive investments. Import scarcities also had to pay a heavy political price. Unemployment became the new scourge along with the chronic mismatch between the outputs of free education and the labour needs of the economy.

Free education expanded the imparting of academic learning and not the technical mass education needed for the development of industries. Industrial development itself was circumscribed by the small national market of the island, its total lack of non-agricultural raw material resources, and indiscriminate import restrictions. State led industrialization proved to be too capital intensive and addressed neither the unemployment problem nor the needs of consumers.

The open economy alternative did unleash the potential for private industrial development and shifted the economic base from its sole reliance on plantation exports. But skyrocketing consumption levels, privatization of education that serves no social or economic purpose, criminal neglect of and corruption in the vital energy and transport sectors, and economically inappropriate and graft generating infrastructure investments have brought the national economy to its current parlous state.

In the assessment of Sri Lanka’s current President, there is no economy left to be reformed! He is promising, among many other promises, a new take off for a better landing at the hundredth anniversary of independence, which neither he nor his followers and critics will be around to witness.

One beam of light that needs to be added to this rather bleak recounting is the story of domestic agriculture, which has been an impressive one in terms of overall growth, if not quite so in terms efficiency of input allocations and certainly not in terms of the distribution of its outputs. Whether comparatively advantaged or not, agriculture is the bulwark of livelihood for the majority of Sri Lankan households; and inclusive of the plantations, it also provides the main domestic base for local industries. Any government can ignore agriculture only at its peril, and the punishment for anyone choosing to monkey with it will be the swiftest and the severest. The organic fertilizer fiasco just proved that, and rightly so.

In 1966, concluding his monograph, Ceylon: An Export Economy in Transition, Donald Snodgrass saw only one certainty “from the historical perspective of 120 years of modern Ceylonese economic development;” and that was, “the search for an economic system that will provide a politically acceptable and economically viable replacement for the classical export economy will continue.” The economy now is far more diverse than what was there in 1948. But the point about the elusiveness of the search for a “politically acceptable and economically viable replacement,” is spot on, 75 years on.

Broken Politics

Of the two, political acceptability and economic viability, it is the political part that has been playing the weightier role in Sri Lanka’s political economy. Politics itself has been swayed by non-economic pressures and compulsions than it has been informed by economic imperatives. The current debate over devolution would suggest that nothing might change even now. Economic doldrums, notwithstanding.

Political divisions along party lines were in their embryonic stage at the time of independence in 1948. The newest political party, the United National Party, had just been formed by DS. Senanayake to contest the 1947 parliamentary elections on a rightwing platform. GG Ponnambalam had formalized his Tamil Congress a few years earlier. And the country’s oldest political party, the Lanka Sama Samaja Party, that had just been freed of its proscription was already in two parts marking the second of its many splits. Rounding off the Left was the Communist Party that had come into being as the first splinter of the LSSP.

Many candidates ran as independents in 1947 and an unhealthily large contingent of them were returned as MPs. The UNP did not win an overall majority (50 of its 92 candidates lost in the elections) but was able to form the new government with the help of independents and Appointed MPs. The efforts of non-UNP MPs, through their historic gathering at Yamuna, the Havelock Road house of highly respected lawyer politician, Herbert Sri Nissanka, to present an alternative bid for power ended in failure, marking the first of many such failures to come. (To be continued).

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Sri Lanka at 100

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by Ram Manikkalingam

Sri Lanka’s future is hanging in the balance as we turn 75.

On its 75th birthday Sri Lanka is divided. There is a stand-off between the people and the political institutions. The people reject Parliament and the President. And Parliament and the President fear the people. This standoff cannot last indefinitely. It will lead to authoritarianism, anarchy or reform. The decisions made, not only by politicians who control our political institutions, but also by the people who want them changed, will determine where we end up.

If there is one person, who has a decisive role in where our country will be in 25 years, it is President Wickremesinghe. While parliament and the people can no doubt make a difference, their decisions must come through political persuasion and mobilization. But President Wickremesinghe can act on his own.

He was picked by the Rajapaksas to protect their interests. But he is not of the Rajapaksas. He protects the Rajapaksas indirectly, by protecting the system that they, and other politicians have benefited from. This system is a combination of rentier capitalism and majoritarian democracy. Businessmen make their money from permits, contracts and quotas provided by politicians. In turn, these businessmen fund the politicians, who run campaigns that favour the majority. Breaking out of this is not what the leading politicians of Sri Lanka want. When the Aragalaya peaked, and the Rajapaksas found themselves rejected, they looked for the next best leader. Someone who would maintain the system the Rajapaksas required for their survival. So Ranil Wickremesinghe was chosen. But he also has a choice.

He can hang onto the Rajapaksas and let the Rajapaksas hang onto him. Or he can begin a serious process of reform that by its very definition will require ditching the Rajapaksas and their ilk.

If he chooses the former option, he will preside over the rapid erosion of the economy and the gradual deterioration of democracy. Because the Rajapaksas very much represent the faction against both political and economic reform. This would prevent him from making the kind of economic reforms required to restructure our debt with the creditors, attract investors, promote equality, and improve public services. As anti reformists, the Rajapaksas would prevent Wickremesinghe from making critical changes required to move the country forward. Instead, they will act as a reactionary force, hostile to any democratic impulse and economic changes that reduce their corrupt grip on power.

This alliance between Wickremesinghe and the Rajapaksas would, in terms of policy, transform itself into an alliance between Sinhala extremism and neo-liberalism. This would precipitate political opposition, not just from political parties, but also from newly mobilized political groupings, including the youth, the students, the middle class, the trade unions and civil society. This opposition, in turn, can lead to state repression, as the government uses its control over the security forces to crack down on the newly revitalized Aragalaya, leading to authoritarianism or anarchy.

Ordinary people, spooked by threats and suffering under the burden of a rapidly deteriorating economic situation, would not even have the wherewithal to protest. They would be struggling to make ends meet, feed, clothe and educate their children, while taking care of the elderly and their struggling kin. The result would be a dispirited country, submitting, once again, to the authoritarianism of a narrow political elite, that unites in the face of popular mobilization.

Instead, the crackdown may also lead to greater mobilization, spiraling out of control despite the armed forces using excessive force. And in an echo of last year, gets rid of the President and this time the parliament, as well. In the absence of a sensible political programme, this systemic change brings neither reform nor revolution. Instead, Sri Lanka becomes saddled with a series of unstable governments that lack the capacity to advance democracy or the economy. Sri Lanka becomes a country where governments come and go, not because of fundamental political changes, but because an influential faction in or out of government is dissatisfied with a particular policy or leader.

This leaves Sri Lanka with a narrow path to political and economic reform that must be picked within the next couple of months.

At the end of February, President Wickremesinghe would have the power to dissolve parliament. He may fear doing so, because the new parliament will be dominated by political parties that are his rivals. He will then have to negotiate reforms with a prime minister who may have more popular support than he does. But does he really have the power to enact reforms, today? Even his positive efforts to release military occupied land and PTA prisoners, and implement the 13th Amendment are being met with hostility by his own faction in parliament. Moreover, any effort to balance the budget, strengthen welfare measures for the poor and vulnerable, raise taxes, restructure loss making State Owned Enterprises – would require a government that has the support of the people, not one that fears them. It is not too late for President Wickremasinghe to lead such a government that includes all political parties.

Sri Lanka has a narrow window to begin a process to deepen democracy and enact economic reforms that would bring us dignity and equality when we celebrate our centenary.

(Ram Manikkalingam is Director of the Dialogue Advisory Group. He was an adviser to then President Kumaratunga and was a Visiting Professor at the University of Amsterdam)

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