SWRD: Jungle, if only you were a Buddhist, then I could make you IGP
By Jayantha Somasundaram
On 28 January, 1962, Sri Lanka awoke to the startling news that a coup d’état by key police and military officers had been foiled. In retrospect, the coup was a crucial turning point in Sri Lanka’s contemporary history. There was a new two-year-old family-centred government viewed by many as inept. Political commentator K. K. S. Perera’s description of January 1962 (The Nation 4/11/12) was that “strikes had crippled the economy; it was going downhill, resulting in increasing cost of living and unemployment.”
Sri Lanka experienced one of the longest unbroken periods of colonial control. When dominion status was granted in 1948, the maritime areas had undergone 450 years of European rule and influence. One consequence was the emergence, in Colombo, of a Westernised, English-speaking non-sectarian elite – largely low-country Sinhalese, peninsular Tamil and Dutch Burgher. A dominant class that was welded into a cohesive group through education and socialisation in public schools, they also shared a modern secular liberal outlook, regardless of racial or religious background. “A select English-educated elitist group … conceives of national integration in terms of a political ideal of constitutional government and unity in diversity ….” explains Prof Jeyaratnam Wilson in Politics of Sri Lanka. “But it has failed to penetrate the layers beneath – the fragmented competitive sub-societies of the real Sri Lanka in the countryside, with its rural elites and peasant economy … associated with mass mobilisation of pre-commercial, pre-industrial peasant people … who emphasise the crucial and critical stigmata of nationalism – the language, culture, traditions and heroes of the dominant nationality – the Sinhala Buddhists.”
In all European colonies, there emerged an elite that adopted the culture, values and lifestyle of the coloniser. In British India Jawaharlal Nehru and Muhammad Ali Jinnah were steeped in British ways and mores. But the high caste aristocratic Indian elite did not change their religion; they retained their religious identity, at most only going as far as to become secular Hindu or Muslim. But in Sri Lanka a significant segment of the Sinhala Goigama elite like the Bandaranaike- Obeyesekere-de Saram families converted to Christianity, as did some of the Tamil Vellalar elite.
Donald L. Horowitz points out in Coup Theories and Officers’ Motives that there was “a great gap between English-educated Ceylonese who were able to pursue careers in the bureaucracy, professions and commercial houses, and Sinhala- or Tamil-educated Ceylonese whose social opportunities and cultural associations were more limited. The gulf was perhaps the greatest in the Sinhalese community. Unlike the Tamils, the Sinhalese were served by a number of elite schools that taught entirely in English. English thus became the language of the home of a significant number of Sinhalese in elite positions. This was not the case with very many Tamils, for the schools in the North were more successful in blending education in English with education in Tamil.
Accordingly, the Sinhala community harboured a certain resentment toward those Sinhalese who had abandoned their language, culture and in many cases, religion for those of the colonisers, and who had reaped the resulting rewards. In a sample of students entering the University of Ceylon in 1950, one-fourth of all students indicated that English was the language of their home.” For example, when at the age of 26, S.W.R.D Bandaranaike returned from Oxford in 1925, he could not speak Sinhala.
“After independence,” continues Horowitz, “there was a movement among Buddhists to gain state patronage for Buddhism, to secure symbolic recognition of the ‘rightful place’ of Buddhism in Sri Lanka and to end the advantages enjoyed by Christian denominational schools. In 1961, nearly all the denominational schools were nationalised by the SLFP government, over the bitter protests of the Christian communities.”
The electoral victory of the Mahajana Eksath Peramuna (the Peoples’ United Front) in 1956 under the leadership of Bandaranaike’s Sri Lanka Freedom Party (SLFP) was seen as a social revolution heralding the dethroning of the Westernised elite and their replacement by a Sinhala-speaking leadership. Although the new government in 1956 could make Sinhala the official language overnight, its benefits for the broader Sinhala Buddhist community were going to take time to manifest themselves. This was because English-language elite Christian public schools had a century’s head start on the Buddhist schools, which would now have to provide the senior civil servants, professionals, military officers and mercantile executives for the new dispensation.
To the incumbent liberal Ceylonese establishment practically every step post-1956 seemed to undermine the stability of the world they knew; and this process seemed to accentuate with Mrs. Bandaranaike’s election as Prime Minister in July 1960. This was evident in the growing Sinhala-Buddhist militancy and the political role of monks. The Westernised middle class feared the eclipse of a plural multi-racial state and the emergence of a Buddhist theocracy in its place.
Three critical events
Against this political background, three critical events triggered a section of the military to plan and attempt a coup.
First, anti-Tamil violence. Bandaranaike’s electoral success in 1956 by championing the cause of the Sinhala Buddhists was not lost on other parties. He however had stood for Sinhala as the official language tempered by the reasonable use of Tamil and upon taking office entered into an agreement with the Federal Party (the Bandaranaike-Chelvanayakam Pact) to accommodate Tamil concerns. The United National Party (UNP) under Dudley Senanayake and J.R. Jayewardene responded with a policy of Sinhala Only and opposed the BC Pact.
In the south, only the Lanka Sama Samaja Party and the Communist Party took a principled stand for parity of status: that is Sinhala and Tamil as official languages.
Thwarted by the clerical right wing of the SLFP led by Health Minister Vimala Wijewardene, Bandaranaike was however compelled to unilaterally tear up the BC Pact in May 1958. This was immediately followed by Tamils becoming the target of organised mobs. Howard Wriggins recorded the events in Ceylon: Dilemmas of a New Nation.
“The outbreak of violence began when a train, presumably carrying Tamil delegates (to the Federal Party Convention in Vavuniya) was derailed and its passengers beaten up by ruffians … Arson and beatings spread to Colombo … Tamils were attacked, humiliated and beaten. Many were subjected to torture and some killed outright.”
Now, a prisoner of its right wing, the Bandaranaike government did nothing.
Finally, the Governor-General Sir Oliver Goonetilleke declared a State of Emergency and called out the armed forces. Tarzie Vittachi records in Emergency ’58 how Lieutenant Colonel F.C. ‘Derek’ de Saram had to deal with CTB gangs in Ratmalana while Major M.O. Gooneratne had to fight off Irrigation Department employees and colonists at Padaviya. In Polonnaruwa Government Agent Derrick Aluwihare had to shelter Tamils fleeing from colonists and was finally compelled to authorise the Army to open fire. For days mobs roamed, challenging people and attacking them if they were Tamil. Vittachi recounts how in Kurunegala a young man was stopped and asked to recite Buddhist gathas to prove he was a Sinhalese. Mendis, a Methodist, was unable to comply; the mob thereupon killed him.
The GA Colombo reported that “passing vehicles were stopped and their occupants mercilessly assaulted. Moving trains were halted at several places and the passengers ruthlessly attacked. There were many instances of arson and such brutal scenes as men being burned alive. Looting was rampant.”
Wriggins concludes: “The toll during the days of disorder included an estimated 300-400 killed: over 2,000 incidents of arson, looting and assault and 12,000 Ceylonese transformed into homeless refugees. The violence spread to the plantation areas where Tamils of Indian origin were attacked resulting in the Indian High Commissioner journeying upcountry to ascertain their welfare.”
Separation of State and Church
After interviewing the coup participants, Donald Horowitz reported that “a number of officers traced their first thoughts of a coup to the anti-Tamil riots of 1958 … a sign as one officer said, that things were falling apart … (they blamed) Bandaranaike’s yielding to crude communal feeling … one officer had arrived fifteen minutes too late to prevent the burning alive of two Hindu priests by a gang of Sinhalese at Panadura.” The incident convinced him that “sooner or later something would have to be done ….” Another officer recalled how they had been cautioned about handling Buddhist monks leading such mobs. His response was that there should be separation of church and state!
Sixteen months later Bandaranaike would be assassinated in a conspiracy led by the SLFP monk-Vice President Mapitigama Buddharakkitha.
The anti-Tamil riots were the first indication of the gap that was emerging between the uniformed officers and a partisan regime. Bandaranaike himself acknowledged this when he turned to the ranking Deputy Inspector General of Police (DIG) C. C. (‘Jungle’) Dissanayake MVO and said: Oh Jungle Jungle, if only you were a Buddhist, then I could make you IGP. The people want a Sinhalese Goyigama Buddhist for IGP.
To be continued tomorrow
How bankruptcy paves way for exploitation of Sri Lanka
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.
The Bonhomie of the Ages
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.
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.
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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