Whatever the original intent of the architects of the Republican constitutions may be, the political system that evolved with the changes introduced in 1978 and thereafter has failed to serve the broad interests of the entire population and the country. It seems to have attracted mainly the self-seeking opportunistic persons into politics. The highly attractive perks and privileges of ‘democratically elected’ representatives, especially the ministers are not available even in the more affluent countries. There are now 110 Ministers in the present coalition government led by President Mahinda Rajapaksa. Parliamentarians after five years of service are entitled to State pension. Free and fair elections now exist only in theory. Not surprisingly, the contest for power and confrontational politics are intrinsic to the ‘democratic process.’

Recent damaging decisions

According to G. Victor A. Goonetilleke, an industry expert with extensive knowledge on hedge products and international experience in financial services, the oil hedging deal between Ceylon Petroleum Corporation (CPC) and banks (foreign - Standard Chartered, Citibank and Deutsche Bank and the state-owned People's Bank and public listed Commercial Bank) is a one-sided financial instrument unfavourable to the Petroleum Corporation. The latter had taken reckless gamble on the assumption oil (crude and refined) prices in the world market would not be declining in the coming years. But the prices which rose to 147 dollars a barrel in September 2008 dramatically slumped to 47 dollars in December 2008. The resultant foreign debt owed to Banks is estimated to be the equivalent of Rs. 2.5 billion. The collar price in the hedging agreements with banks was 100 dollars per barrel.

[Lanka fuel bowser-pic-Shehal Joseph]

According to this expert both incompetence and sleaze are evident in the one sided conditions underlying the deal. In the fundamental rights petition filed by Chairman of Laugfs, W.K.H. Wegapitiya and UNP MP Ravi Karunanayake, the Supreme Court on November 28 called upon President Mahinda Rajapaksa to remove the Petroleum `and Petroleum Resources Development Minister, A.H.M. Fowzie from this ministry and the Chairman, Ceylon Petroleum Corporation Asantha De Mel from his post. The Court wanted the President to take over the Petroleum Ministry immediately and appoint a new Minister. The Supreme Court also halted payments in the derivatives deal pending an inquiry by the Central Bank.

On December 3 Minister A. H. M. Fowzie told Parliament that it was the Central Bank Governor, Nivard Cabraal who wanted the oil hedging deal with the banks. Hedging is an instrument widely used in international trade, and there is nothing inherently wrong in urging the government to consider it. It is not clear whether the Central Bank approved the draft agreement before it was signed. However, the CPC has signed up to a deal in which it stood to lose infinitely more than the banks, should the hedge go wrong as it did later. Apparently the Petroleum Minister had submitted a Cabinet Paper on the oil hedging deal and got prior approval. It is unclear whether legal and other expert advice was sought and obtained before agreeing to the draft agreement.

The hedging deals which had now gone wrong were a high-risk options strategy called a 'Leveraged Target Redemption Swap' requiring expertise in the field “to change instruments based on the developments in the market”. A novice cannot become an expert overnight through brief visits to few countries abroad. Apparently, this is exactly what happened with the former Chairman of the Petroleum Corporation. The foreign trips were also financed by the principal foreign bank involved in the hedging. It is likely the CPC has been influenced by the views of the top foreign bank official in Sri Lanka.

[Mihin Air-pic by Asanga Rathnayaka]

The controversial new budget airline ‘Mihin Air’ is another case of a passionately conceived venture without proper feasibility study. High investments of this magnitude require cost-benefit analysis based on different plausible assumptions. Many established air lines including budget airlines in countries where there are known demands for air travel are finding it difficult to survive, particularly at the present time with the global credit crunch and economic recession. The new budget airline, Mihin Air could not continue even for a year as it incurred a loss of Rs. 1.5 billion. In an interview published in the Sunday Observer December 7, the Minister of Ports and Aviation and Irrigation and Water Management Chamal Rajapaksa conveyed renewed confidence in the viability of Mihin Air under the new management and with the additional capital Rs. 1,100 million currently sought from the government. According to Opposition Leader Ranil Wickremesinghe the government has “committed Rs. 6,000 million to resurrect the insolvent Mihin airline which has already squandered Rs. 3,250 million of public funds”.

The basis for the confidence in the reorganized Mihin Air is not from a sound analysis taking into account the anticipated demand and the full cost of operation but on a set of assumptions which as in the case of the oil hedging deal can turn out to be wrong. To the question, “why do you think the Government wants to promote Mihin Air when the concept of budgeted airlines seems to be a failure”, the Minister replied: “The Government felt the need of having our own airline which air freight is affordable to the ordinary people. On the other hand, we had to face the challenges from Emirates. We started Mihin with a good intention, but we did not have the total capital it required at the beginning and faced financial crisis but Mihin was in operation for a year. Therefore, this concept is not a failed attempt”.

To another question the Minister replied: “It is our aim to make it (Mihin Air) a profitable airline. We have taken steps to re-start it. In future Sri Lankans can select Mihin as their budgeted airline. We want to serve the ordinary people of this country” He also said that the targeted customers are “those working in the Middle East and the pilgrims to Buddhist destinations”. There are lots of ifs in the anticipated success. “If the air freight is cheaper than other airlines they will come to Mihin”. What proportion of the ordinary people are in need of ‘cheap’ air travel? The vast majority are desperate for other pressing needs. Public road and rail transport services need considerable improvement.

[Train from Kandy to Hatton-Oct 2007 pic: byMcKay Savage]

The All Ceylon Railways General Employees Union has charged that none of the 100 train compartments recently imported from China can be used for travel in the upcountry as they have a tendency to slide down the slope when stopped as the breaks are unreliable. The cost of each compartment is Rs.25 million. Furthermore, four dining cars that were also imported from China have not been used at all, as they do not have sufficient water supply. The Union General Secretary S. Manawadu is reported to have complained: “The Ministers and officials who made the decision to import these compartments at massive costs had no idea regarding the requirements of local travellers. The dining habits of Sri Lankans are different from the Chinese”.

According to him, “the purchase of 15 power sets would have been sufficient to upgrade the beleaguered train services of the entire country, but with the massive expense incurred in the Chinese transaction, many irregularities have come to light”. The General Secretary pointed out that “only 64 of the 100 compartments are being used, but even these are hampered by technology incompatibilities as they do not match the engines already in possession of railway authorities. The 36 remaining compartments have not been used as there are not enough engines”. The haphazard ways decisions are made and the lack of efficient system for ensuring the accountability of the decision makers are also matters that need to be considered.

‘Corruption Watch’, a non-governmental organization has vowed to go ahead revealing corruption and misuse of public funds regardless of possible life threats or other intimidation to its members. Attorney Shiral Lakthilaka of the Corruption Watch is reported to have said that “it had become a pattern where authorities swindle public funds and deposit in some other country. They then come back to the country and stay as if nothing has happened. We at the Corruption Watch would like people to know that they can inform us about any fraud or a corruption and we are willing to go beyond the boundaries. We assure that we will take legal action against those who flee the country or seek salvage in foreign countries under the fiscal laws in those countries.”

The Attorney said that “the government would not do such a thing as it was corrupt from the top to the bottom while adding it was not only the hedging deal but the entire government was a gamble. He also said that the government engaged in gambles where it misused public founds and committed corruption while comfortably guarding itself by talking of patriotism and the successes of the war”. He also challenged the government to remand former CPC Chairman Asantha de Mel for causing a loss of Rs 4 billion and take legal action against former Treasury Secretary P.B. Jayasundara who was earlier declared by the Supreme Court in a separate rights case, as unfit to hold any public office.

The corrupt practices under the executive system are not exclusive to the present regime. This is evident from the recent exposure of the sleaze behind ‘Waters Edge deal’ following another successful rights case heard by the Supreme Court judges. They found former President Chandrika Kumaratunga and other connected persons guilty of abuse of power and engaging in an illegal land deal. She has been fined Rs. 3 million for her improper role in this deal. The Court directed Mr. Ronnie Peiris to pay Rs 2 million and Messrs. Shantha Elroy Godwin Wijesinghe, Siva Selvaratnam and Ms. S.Gressel Selvaratnam each to pay Rs. one million to the State and also instructed the Director General Commissioner of the Bribery and Corruption Commission to conduct an immediate inquiry of the entire transaction with particular scrutiny on the action of former President Kumaratunga, the Urban Development Authority, the Asia Pacific Golf Course Ltd., Ronnie Peiris, the Board of Investment, Managing Director of the Asia Pacific Golf Course Ltd. and other involved individuals. The Commission on December 3 tendered to the Supreme Court a confidential report on the impugned transactions alienating land in Narahenpita for the purported golf course project. There are other cases related to the ‘Waters edge deal’ awaiting the judgment of the Supreme Court.

Intentionally keeping the system deficient

The Parliamentary Select Committee system provided some check on the utilization and management of public funds. The Committee on Public Enterprises and the Public Accounts Committee found many irregularities including corruption, mismanagement and misuse of public funds. Instead of taking follow up actions on their findings, the committees were reconstituted with government Ministers as Chairmen. Obviously, there is no real interest even to cut costs and improve the effectiveness of the public sector by making use of the available limited controls. Executive powers under the present constitution as intended by its founder are unrestrained and could be misused. It has been found those leaders who are aware of this danger and vowed to change the system once elected to this powerful office preferred to keep it as powerful as before for reasons known to themselves. The implementation of the 17th Amendment will restrict some supreme powers of the Executive President. The Constitutional Council and the various independent commissions to be set up as stated in this Amendment should have been intrinsic elements of the original Constitution adopted in 1978.

Excuses are given for delaying the implementation. The delay in constituting the Constitutional Council is due to the waiting for the final report of the Parliamentary Select Committee set up in 2006 to consider improvements to the hastily approved 17th Amendment. Although the initiative to introduce the 17th Amendment came from elsewhere, in a rare act of bi-partisanship it came into law in 2001. The reason for this partnership was that on the eve of a parliamentary election the two main rival parties did not want to be seen by the electorate as opponent of good governance.

In the rights petition filed by Sumanasiri Liyanage, senior lecturer in economics at University of Peradeniya and Subash Ravi Jayawardena, Attorney-at-Law and Executive Director of South Asia Peace Institute, they complained that despite repeated requests by the public and civil society organizations, the Constitutional Council a mandatory requirement under the 17th Amendment had not been reconstituted as fresh appointments had not been made since March 2005. The two petitioners had cited President Mahinda Rajapaksa, Speaker, W. J. M. Lokubandara, President’s Secretary, Lalith Weeratunga, the Attorney General and the Opposition Leader Ranil Wickremesinghe as respondents. The Supreme Court had declared earlier that the President, Prime Minister and the Leader of the Opposition should reach a consensus on the nominations to the Council and notify Court of the developments. Now the Court had granted final time for the parties to convene a meeting as early as possible (within one month) in order to arrive at a consensus on the nominees.

The recent intervention of the Supreme Court in executive matters would not have arisen had these independent bodies been set up and political influence in public administration and enforcement of law and order prevented. Political patronage, nepotism and other unacceptable practices had undermined good governance. The clamour for good governance by few concerned citizens and civil society organizations fell on deaf ears. In Sri Lanka people power has significance only during election times and that too not to the same extent as it was 30 years ago. The persistent clamour for independent election commission has also been ignored. Setting up committees to investigate unpleasant incidents is seen as mere tactical move and not for bringing the culprits to justice. The culture of impunity is intrinsic to the corrupt system. Under the pretext of security concern, attempts have been made to curb media freedom.

In matters of constitutional governance citizens are increasingly compelled to go to the judiciary for help. How long can this continue? Not for long, because under the system the authority to appoint the Chief Justice rests with the Executive. The Morning Leader December 3 in its editorial said, the absence of sense of responsibility among politicians and officials occupying high and responsible positions in state institutions has been suppurating wound in Sri Lanka’s body politick. This was not the case before the 1972 Republican Constitution and the administration politicized. The rulings of the Supreme Court on important decisions of the executive branch show clearly the neglect of public interest in governance. Given the extent and nature of the problems in Sri Lanka, holistic approach is needed to get rid of them all together and secure a promising future for all citizens - Sinhalese, Tamils, Muslims and others. When the civil society remains silent as in dictatorial regimes, democratically elected political masters behave like autocrats.

Ethnic problem and 13th Amendment

Following President Rajapaksa’s idea, the 13th Amendment re-emerged in January 2008 as interim recommendation of APRC. This Committee served to mislead all including foreign diplomats and intellectuals clamouring for a political solution to the protracted ethnic problem. The intent of the President was to give hope rather than pursue with determination a reasonable political solution acceptable to the ethnic minorities. This is a difficult task given his desire not to upset the Sinhala nationalists. Although full implementation of 13th Amendment was promised as an interim solution, there has been no serious move towards this for nearly a year.

The JVP parliamentary group leader Anura Kumara Dissanayake questioned in Parliament on December 4 the report in the government owned Sunday Observer November 30 that a committee has been appointed to inquire into the granting of land and police powers to Eastern Provincial Council. He then drew the “attention of the august assembly to the serious situation pertaining to the sovereignty and the unity of Sri Lanka"!

Apparently, the JVP does not want the government to betray the victories of the security forces by any move towards devolution. He also annoyingly said, "On many occasions, the government has discussed extensive devolution of power beyond the 13th amendment" and specifically referred to President’s interview with Al Jazeera television in which he stressed the need for extensive power devolution as the solution to the Sri Lankan ethnic conflict. He also cited the joint statement issued after Basil Rajapaksa’s official visit to Delhi for bilateral talks, which stated that “the two parties had discussed granting land and police powers to the provinces in accordance with the 13th amendment”. He accused the government of trying “to politically betray the achievements of the heroic security forces at the battlefront”. The war has raised patriotic feelings amongst the Sinhala nationalists and helped to overlook serious shortcomings in the administration.

It is apt here to quote William Shakespeare. "Beware of the leader who bangs the drums of war in order to whip the citizenry into patriotic fervor, for patriotism is indeed a double-edged sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry, [who] infused with fear and blinded by patriotism, will offer up all of their rights unto the leader and gladly so. How will I know? For this I have done. And I am Julius Caesar."

It is with the support of the government Sivanesathurai Chandrakanthan alias Pillayan of the TMVP became the Chief Minister of the Eastern Provincial Council. He expected the full powers listed in the 13th Amendment to be devolved and was demanding land and police powers. Given the opposition of the Sinhala nationalists, especially those who believe in ‘military solution’ to this request, the President’s office was in a dilemma. A way to check Pillayan was found by promoting Vinayagamoorthy Muralitharan alias Karuna Amman the ex-Tiger militant and founder of the TMVP. The latter, who is now an appointed MP, openly stated that land and police powers to the Provincial Council were not necessary. This kind of tactical moves will not help in solving national problems.

Earlier federalism was synonymous with separation and now devolution is also considered as such by Sinhala patriots. No attempt is being made to disprove this misconception. There are many broadminded Sinhalese who believe strongly that devolution with the center retaining some control as in India will not endanger the unity, sovereignty and territorial integrity of Sri Lanka. On the contrary, this will unite the divided Lankan society and reinforce the sense of belonging to one Nation. .

In a two-part article (The Island 26 and 27 November 2008) Chandra Wickramasinghe has discussed the devolution imperative and certain perceived impediments to the effective implementation of the 13th Amendment. He has drawn attention to the present weaknesses at the center and provinces that need to be addressed for successful implementation. He has also explained how the Indian Constitution makers have protected unity, sovereignty and territorial integrity of their Nation. They have “with admirable foresight, retained certain powers perceived by the Central Government as being vital safeguards necessary to ensure consistency in national policy and most crucially to protect the sovereignty and the territorial integrity of that Nation State”. Thus there is no threat from devolution of powers per se with t vital constitutional safeguards. It was the Sri Lankan State that made the centralized system in its present form unacceptable to the ethnic minorities.

The need for holistic approach to free Sri Lanka of several problems blighting the nation’s future is also evident from the detailed analysis. “Corruption, lethargy and inefficiency may be replicated or even amplified in the devolved units unless effective safeguards and preventive measures are introduced to check them. Corruption is so pervasive island wide today due primarily to the horrible example set by the elected representatives and the political decision makers. Political patronage nurtures and protects official corruption and often there is collusion between dishonest politicians and obliging public servants”. Thus there are formidable challenges that must be overcome for Sri Lanka to become a tranquil island nation with improved outlook. The analyst has stated the obvious. “The above problems could well be successfully surmounted if the political authorities have the necessary determination and the political resolve to do so”. The vital question is: Do they have these? There is no sign yet to answer affirmatively.

[10,000 displaced persons returned in 2007, Eachchilampattu, Sri Lanka East-pic. Drs. Sarajevo-more pics]

In conclusion

The social and economic problems have been somewhat overshadowed by the ethnic problem that intensified into a secessionist war at enormous cost to the people and the country. The failure of the State to resolve it at the beginning when it was possible within the existing structure led to the tragic consequences. No firm estimates of the casualties since the early 1980s when it escalated into armed struggle are available It is believed more than 200,000 lives have been lost. The national economic loss is much higher than the cost of the destroyed tangible assets. The cost of neglecting the development of some regions bestowed with valuable natural resources, because of ethnic politics is huge. The consequences of avoiding political settlement at an early stage to internal problems of his nature are also significant.

K. Godage former Ambassador and now a political analyst has also emphasized the need for a new Constitution in his article in the Sunday Island 23 November 2008. His observations are very relevant to recognize the need for action to improve the future of Sri Lanka. On politics in Sri Lanka he has said it has become a blood sport governed by the rules of the slum. “After 60 years and three Constitutions the sad truth is that we have, as a country, regressed and not progressed in almost every sphere of human endeavour. The country has been torn apart by the so-called system of Cabinet government that the British imposed upon us perhaps with the best of intentions. We have even corrupted that system, removed the entrenched safeguards for minorities, made a caricature of the electoral process, and from 1978 established a constitutional dictatorship. None of the four Presidents who succeeded President JR Jayewardene, who was the architect of the abominable system, have sought to change it. We the people must mount a campaign to change the constitution”.

He has also said: “It is the moral obligation of this generation of citizens of this country to ensure that the next generation will not inherit this corrupt political system”. Leaders in every segment of the society “should take their civic responsibilities seriously and “come forward to mobilize the people and usher in a non-violent, peaceful revolution to save our country and make it a better place for the generations to come. Now is the time to demand that a Constituent Assembly be established to draft a new Constitution”. He has not gone into the details. If it is a repeat of the ways used in the 1970s when mainly the Sinhala majority views decided the structure and the contents, it will not serve the intended purpose. The situation now is more confused and difficult with political parties like the JVP, JHU and JNP or NFF whose firm stands on the ethnic problem are well known from the APRC experience.

Following the many favourable responses received to his call for a new Constitution, he has proposed in his next article – “A new constitution – the need of the hour” (Sunday Island 30 November 2008) - a suitably modified Executive Committee System instead of devolution based on the Indian model. His main argument against the Indian model is the vast difference between the sizes of the two neighbouring countries. This is not a convincing reason, as there are small countries in Europe where devolution has been successful in fostering unity, stability, peace and progress. His focus is mainly on the elimination of confrontational politics and not the resolution of the ethnic issue. Both are important for securing the future of Sri Lanka. Without the consent of incumbent and the aspirants to the Presidency, the suggested Constituent Assembly is a non-starter. The proposed “non-violent, peaceful revolution to save our country” is also wishful thinking. People must be fully aware of what the future will be for them and their children if the system remains in its present form. The call for change must come from all sides. Spreading this awareness is the noble task of the media and civil society leaders.

[The writer is Former Additional Deputy Secretary to the Treasury, Sri Lanka and UN Advisor, Development Economics/Planning]